Adventures in Legal Outsourcing to India and Beyond

June 12, 2013

There
is only one US law firm managing a legal outsourcing company in India. Now
that firm, co-founded by yours truly, has taken matters a step even further. The
"Star of Mysore" newspaper reports on this today as follows:

Mysore-based
LPO (Legal Process Outsourcing) SDD Global Solutions Pvt Limited, an affiliate
of SmithDehn LLP, which is best known for its representation of prominent film
studios, television companies, and entertainment clients around the world, will
now be known as SmithDehn INDIA.

Starting
from today, SmithDehn LLP has lent its name to the Mysore firm. One of the main
reasons SmithDehn LLP has allowed the Mysore company to use its law firm’s name
is the high-end nature of the work the Mysore professionals do. The services
they perform make SmithDehn INDIA more like a law firm, and less like a typical
LPO operation. The new name is expected to be more effective in attracting
clients who are more comfortable with legal outsourcing when the offshore
company is affiliated with a Western law firm, and in attracting top-notch
employment talent from around India.

SmithDehn
INDIA's public announcement offers more details:

Plenty
of Western law firms now use off-shoring of legal services routinely, whether
they like it or not. Many have been pushed into it by cost-conscious clients. But
SDD Global's name change reflects how the situation with SmithDehn is different.

"First
of all, we don't just tolerate sending work to India; we love it, and we're
proud of it!" says one of the firm's co-founders, Russell Smith. A
Columbia Law School graduate and counsel to celebrities such as film star Sacha
Baron Cohen, and other media players like HBO and Paramount Pictures, Smith explains
it this way: "The overnight turnaround, the cost savings we pass on to
clients, the increase in our number of clients and assignments, the high
quality of the Indian workforce... What's there not to love? We owe our growth
and profitability to a strong policy of wowing clients. With the Mysore team,
we've had to chuckle, because clients actually use the word, 'wow.' They say it
again and again!"

When
asked whether his firm loses revenue to India, Smith responds with an emphatic
"no." "The situation is the opposite," he says. "The
Indian operation increases our law firm's revenues. When
western companies find out about our less expensive, faster, and better
service, they hire us. Often they send work to our law firm that otherwise would
have been done in-house, or not at all. One filmmaker told me that without the
low fee we charged for the legal work, his film could not even have been
released, much less could it have won the acclaim it received. So while we send
a significant portion of our work assignments to India, it's part of a much
bigger pie that's created when legal services are affordable. India gets more
revenues, but so does our US law firm. That's one reason why outsourcing
actually increases, not reduces, the number of Western jobs. In the case of
SmithDehn LLP, we've hired more Western attorneys precisely because of the
expanded workload coming in from our outsourcing model."

On
the subject of lower costs in India, Smith says it's not just about salaries.
"Yes, we can be one of the highest-paying employers in Mysore, and still
pay much less in salaries than we would in Los Angeles or New York. But the
savings come also from much lower office rent. Most prominent Western law firms
lose a huge chunk of their revenues to big city landlords, for office space.
Why should we pay tens of thousands of dollars per month in New York or Los
Angeles or London, to provide a place for people to work for our clients, when
the Mysore operation can function just fine at $540 (Rs. 27,000) per
month?"

Another
reason SmithDehn LLP has gone so far as to allow the Indian company to use its
law firm name is the high-end nature of the work the Mysore professionals do.
The services they perform make SmithDehn INDIA more like a law firm, and less
like a typical LPO (legal process outsourcing) operation. Vidya Devaiah,
Managing Director of the company, puts it this way: "We don't offer legal
advice or replace Western lawyers, but we do most of the research, analytics,
and drafting work that goes into the final product. We're talking about
sophisticated, intellectually challenging assignments, not document coding or
clerical work. That's why our company has been given screen credit in over 25
films and television series, right next to the credits for the law firms. We're
doing work that clients really appreciate. And that's the case not only for
entertainment clients, but also for many others, and for law firms other than
SmithDehn, who also hire us and rely on us."

Indeed, the SmithDehn INDIA phenomenon
appears to be part of a much larger developing trend -- one that could have
huge implications for the legal world. For example, in a report last September
by the Outsourcing Unit of the London School of Economics, in
a section headed, "LPO Providers Will Move Up The Value
Chain," two experts concluded that legal outsourcing providers
increasingly will take on more sophisticated assignments:

costs available
through labor arbitrage. Clients initially feel most comfortable sending
discrete work with low complexity and low criticality offshore, the so-called
'white chip' work. (In poker, tradition has it that white chips are the least
valuable, red chips are of medium value, and blue chips are most valuable.) If
LPO follows a path similar to ITO and BPO growth, the LPO market will move up
the value chain to include more red chip and even blue chip work."

Given
that hundreds of billions of dollars are spent each year for this kind of work,
the possibilities for growth of companies like SmithDehn INDIA could be
enormous.

March 20, 2013

In the following article from the February 27, 2013 edition of The Star of Mysore ("A Mysore Company's Quiet Presence at the Oscars"), the story is told how legal process outsourcing continues to thrive and expand, contrary to headline-grabbing, misleading reports on the alleged "Death of Outsourcing":

While the Academy Awards in Hollywood
last Sunday did not feature gold statuettes for Indians, a legal process
outsourcing company from Mysore had made a quiet presence at the Oscars. SDD
Global Solutions, a legal outsourcing firm based in Kuvempunagar, did the legal
research and drafting necessary for the release of the Oscar Winner for Best
Documentary Feature, "Searching for Sugar Man." Because they helped
solve the film's legal problems, SDD Global and its parent law firm, SmithDehn
LLP, are included in the end-credits. This already multiple-award-winning
movie, distributed by Sony Pictures Classics, was the first film acquired at
last year's prestigious Sundance Film Festival. Ever since, it's been a
favorite of critics and audiences alike. Legendary film critic Roger Ebert
said: "Do NOT miss it. Astonishing." Famous film director Michael
Moore noted that this "stunning, incredible documentary had [festival] audiences
leaping to their feet." As Sony Pictures sums it up: "Searching for
Sugar Man tells the amazing, true story of Rodriguez, the greatest '70s rock
icon who never was."

And that's not all. The legal team in
Mysore also is being praised by the director of yet another film festival
selection, "Muscle Shoals," premiering at Sundance this year.
"Muscle Shoals" Director Greg "Freddy" Camalier says this
about his India legal support team: "One thing that made our film possible
was the amazing legal team at SDD Global Solutions. Independent filmmakers now
have a way to do their work without being burdened, or even stopped altogether,
by impossible legal fees. SDD Global gave us top-tier legal services at a
fraction of the usual cost." In it's press release, Sundance describes the
movie as "the greatest untold American music story," explaining as
follows: "Down in Alabama, Rick Hall founded FAME Studios and gave birth
to the Muscle Shoals sound. Mick Jagger, Keith Richards, Gregg Allman, Aretha
Franklin, Etta James, Alicia Keys, Bono and others bear witness to [it]."

SDD Global also worked on HBO's
"Manhunt: The Search for Osama Bin Laden," another acclaimed movie premiering
at Sundance.

In all, the Indian company has
amassed screen credits in over 25 Hollywood films and television series,
according to IMDb, the Internet Movie Database. SDD Global's credits range from
huge cinema hits like "Borat," the highest-earning comedy in movie
history, to "Gold Rush," which is currently the most popular show on
U.S. cable television. Over the years, the Mysore team has done legal work for
such heavyweights as Paramount Pictures, Twentieth Century Fox, Sony Pictures,
and HBO.

These are further examples of how legal
outsourcing to India is not just for documents anymore, and how India's role in
the worldwide entertainment industry extends far beyond Bollywood. Perhaps more
importantly, this story runs counter to a recent
narrative that points to an alleged reduction of outsourcing on the part of
some Western companies. For example, KPMG recently released a report,
provocatively titled "The Death of Outsourcing." Much of that
reporting relates to increasing payscales in countries like India, compared
with salary stagnation in the West. This has occurred especially in the usual
outsourcing-prone areas like IT, manufacturing, and call centers. However, U.S.
media and entertainment lawyer Russell Smith, from SDD Global's parent law
firm, SmithDehn LLP, says this trend for the most part does not apply to
high-end legal outsourcing. "Yes, salaries have gone up in India, and our
India team is paid very well," he says, "but many law firms in the
West are still trying to charge clients 5-10 times what our India team charges.
And the India team is often more responsive, getting the work done not only
with rigorous professional quality, but also overnight, thanks to the time zone
difference." Smith adds: "Real estate costs also continue to be a
strong factor, with Western law firm fees including the costs of expensive
office rentals, which are about 40 times the cost of commercial space in
Mysore, India." For these and many other reasons, Smith continues to be
optimistic about the future of legal outsourcing: "Given that companies
pay over $250 billion per year for legal services in the US and the UK alone,
this continues to be a huge market opportunity."

January 08, 2013

We interrupt this irregularly scheduled programming, to bring you this special announcement from our law firm!

SmithDehn
LLP is extremely pleased to announce that Laura Farina, who
until recently was the Vice President for Legal Affairs at
Discovery Communications, Inc., has become a member of the firm.
Laura is acclaimed throughout the television and media
industries for her skills and experience as a
media/entertainment/sports lawyer. She excels in transactional
drafting and negotiations, defense litigation, media/event
insurance and risk management, intellectual property advice, and
content review. During her 12 years as in-house counsel for the
world's #1 nonfiction media company and all of its networks and
business units (including The Discovery Channel, TLC, Animal
Planet, Science and Investigation Discovery, and many others),
with over 1.8 billion viewers in 209 countries, Laura was Vice
President in charge of global litigation, supervised
transactional work and content review for hundreds of programs
and films, handled the company's insurance matters (playing a
key role in negotiating and drafting its media insurance
policy), and generally served as a problem solver, risk manager
and adviser to all of its networks and business units.

As a
member of SmithDehn LLP and head of our new Washington, D.C.
office, Laura brings her stellar array of expertise to the table
for independent and other television and film production
companies, studios, broadcasters, distributors, and insurance
companies, as well as sports entities and players. On the subject
of her move to SmithDehn, Laura says: "I'm happy to be working
with such accomplished lawyers and serving clients in the media
and sports industries across the globe. I'm also proud to have
served at Discovery and to have played a part during its time of
tremendous growth and success. I cherish the many friends and
colleagues I met there. As the television and entertainment
landscape continues to evolve, and as independent production
companies flourish in particular, I'm eager to increase my direct
involvement with filmmakers, production companies and content
developers and provide them with the benefit of the huge range of
experience I've gained over the years. SmithDehn LLP, as an
innovative and rising leader in the field, is the perfect match
for my continuing legal career."

December 05, 2012

The American Bar Association's GPSOLO magazine focuses on the needs of the majority of the ABA's members, namely, attorneys at small firms, general practitioners, and solo lawyers. In the November/December issue, veteran appellate lawyer and multiple book author William L. Pfeifer Jr.* weighs in with an informative article on "Privacy and Legal Outsourcing." Surveying various U.S. ethical obligations, Pfeifer points out that attorneys who would like to outsource work to non-lawyers, whether on-shore or off-shore, should do more than conduct a simple internet search for the least expensive provider. They need to "consider the credentials of the provider, the nature of the services,
how client information will be protected, and the legal and ethical
rules that will apply in the jurisdiction where the work is performed."

Pfeifer goes on to explain why many U.S. lawyers continue to outsource work to India. In addition to the well-known fact that "outsourcing overseas has a significant advantage when it comes to price," and that "India in particular is a popular source of legal outsourcing services
because of its citizens’ advanced English skills and the similarity of
its legal system to ours," another reason is the recent changes in India's privacy laws:

"India recently enacted new privacy laws imposing both civil liability
and criminal punishment for certain privacy violations. Legal
outsourcing providers can be subject to civil liability for failing to
use reasonable security practices and procedures when handling sensitive
personal data or information if their failure results in harm to any
person. It is also now a crime in India for a person to disclose
sensitive personal information without the consent of the person or in
breach of a contract with the knowledge or intent that the disclosure
would cause wrongful gain or loss. This increased level of liability
would seem to satisfy the concerns raised in the ABA Comments over the
laws of the jurisdiction where the outsourced work is being performed."

Pfeifer warns, however, that "counsel still should ensure that proper data security
procedures are followed and that the services are conducted in a
competent manner." On that front, he conveniently mentions one Indian LPO provider that stands out favorably (and we're glad, since it's ours):

"Unlike some outsourcing services that are
entirely foreign corporations, SDD Global Solutions is managed by the
law firm of SmithDehn LLP. Many law firms hire SDD Global Solutions
because their processes and procedures are being overseen by a
U.S.-based international law firm. Vidya Devaiah, managing
director of SDD Global Solutions, recommends that 'The main
considerations that an attorney should keep in mind when hiring an
outsourcing provider are the hiring policies and training policies of
the firm. This will help ensure quality work product. If the concern is
about data security on a large scale, then it is often best to pay a
site visit to the firm and assess the security measures firsthand.'
Devaiah says SDD Global Solutions’ office is secured, with restricted
access only through the use of an electronic swipe card, and each
employee has access only to certain areas. Also, employees sometimes
access data from the client’s servers and do not store that data on
their own computers. In addition to such security measures, Devaiah says
that 'security, for the most part, lies with the people.' For this
reason, SDD Global Solutions is very selective in its hiring process and
subjects every candidate to an extensive background check before
offering employment."

September 25, 2012

Sadly, more than a few critics will take potshots at Fareed Zakaria in particular, when it comes to the subject of outsourcing. After all, he was busted (and apologized) for outsourcing some of his writing to uncredited others. Zakaria nevertheless remains one of the world's most influential pundits in the realm of international affairs and economics. He remains the host of CNN’s flagship international affairs
program, "Fareed Zakaria GPS," Editor-at-Large for TIME magazine, columnist for The Washington Post, and a New York Times bestselling author ("The Post American World"). Also, Zakaria is beyond categorization politically. Although he endorsed President Obama in 2008, by no means does he tow the Democratic Party line. His views on outsourcing, for example, are contrary to the stated positions of both President Obama and Governor Romney, as these politicians scramble for votes from people who mistakenly believe outsourcing is an enemy. Zakaria's points, especially on how outsourcing allows businesses to thrive domestically, apply with special force to legal outsourcing, which can free not only companies but also law firms, from outmoded inefficiencies that unnecessarily increase cost and stifle growth. Thanks to legal offshoring, our own law firm continues to add supervisory and other American lawyers to meet the increased demands of happy clients, new and old, who have seen their legal costs go down, through utilization of outstanding, US-and-UK-law-trained professionals in Mysore, India. Below are excerpts from a rush transcript of Zakaria's GPS program on CNN, from last weekend (September 23, 2012):

Now for our What in the World segment. There's one issue on which Barack Obama and Mitt Romney are in agreement: outsourcing.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: "We do not need an
outsourcing pioneer in the Oval Office. We need a president who will
fight for American jobs."

MITT ROMNEY, GOP PRESIDENTIAL CANDIDATE: "If there's an
outsourcer-in-chief, it's the President of the United States not the guy
who's running to replace him."

ZAKARIA: Every week, politicians on both sides of the aisle bash
outsourcing. Each accuses the other of shipping jobs to China. But,
hang on. What is so bad about outsourcing? Let's look at the facts.
A common misconception about outsourcing is that it is a zero-sum
game. By that I mean that when an American job is moved to China, we
tend to read the score as China +1 and American -1.

But a
recent study from the London School of Economics' Center for Economic
Performance reviewed 58 American industries between 2000 and 2007. They
found that instead of limiting jobs for Americans, immigration and
off-shoring actually improved the domestic job market.

You
can understand why. If a company can lower its costs by outsourcing, it
is likely to survive and flourish and, thus, eventually hire more
workers in America.

Outsourcing is actually a fancy word
for a simple, ancient idea. People should specialize at what they do
best. Adam Smith described it as far back as 1776. He wrote in the
Wealth of Nations, "If a foreign country can supply us with a commodity
cheaper than we ourselves can make it, better buy it of them."

The concept dates even further back, perhaps right back to the first
rudimentary marketplace. Buyers always look for the best deal on the
market.

The difference today is the market is a highly
global, competitive space so for a company to survive, it needs to seek
out the best place to make its goods.

And hundreds of
millions of consumers benefit. They get cheap goods and services.
Everything from iPhones to airline tickets would be a lot more expensive
if not for outsourcing.

U.S. companies don't simply ship
jobs out to China or India because labor is cheaper there. They do so
also to gain a foothold in growing emerging markets. And, as new
economies rise, they buy more American products and services and they
invest their capital in the United States.

When the North
American Free Trade Agreement was being implemented in 1994, many
feared the deal would result in hundreds of thousands, millions of lost
American jobs.

People though cheaper Mexican labor and
goods would replace American-made products. But all those years later,
most economic studies show that NAFTA's net effect on jobs was
negligible. Instead, NAFTA helped both the Mexican and American
economies to expand.

Now, outsourcing and trade can be
misused. If corporations ship production off-shore to avoid taxes or do
it in a short-sighted way. Companies need to recognize that American
workers, high-wage workers, can produce quality goods efficiently, as
they do in Germany for example.

But the reality is that, as
a concept, outsourcing is not only useful, it is inevitable. It's
never easy to see a job move from one country to another. But jobs are
lost by automation too. Does that make progress bad?

The
answer isn't to criticize outsourcing. Instead, we need to find ways to
build on its advantages. By being negative about a pretty standard and
age-old global practice, both political parties are masking a lack of
real ideas.

November 25, 2011

Trying to find a westward trade route to India, in order to spur on the outsourcing of the production of silk and spices, Christopher Columbus famously miscalculated. He thought he had found India, in what most now call North America. Of course this is the reason why Native Americans mistakenly have been called "Indians."

The Pilgrims and Puritans settled in New England in the 1600's, and they launched the tradition of "Thanksgiving," sitting down to meals with the so-called "Indians." This is because the settlers had run out of food. Like Columbus, the settlers made some miscalculations of their own. For example, as Garrison Keillor reminds us, the Puritans and Pilgrims came to America "in the hope of finding greater restrictions than were permissible under English law." For a while they succeeded. They established theocracies, outlawed celebrations of any kind, and even made it a crime not to attend church. But their dreams of totalitarian repression were short-lived. The radicals and liberals of the American Revolution had different ideas!

On this Thanksgiving Weekend, let's be thankful for the real Indians, as well as the Native Americans, the settlers, the revolutionaries, and our many other blessings. I'm especially grateful that with modern offshore outsourcing, Americans finally have discovered a new route to India! In this global business environment, work does not stop for Thanksgiving. Our law firm's international clients are just as busy over the US holidays, so without offshore legal outsourcing to India, our attorneys would have much less time off. UK production companies don't stop making films or television series just because it's Turkey Day, and they need frequent legal advice. Multinational Indian companies doing deals in Singapore, China, the UK and elsewhere still need legal research and reports, and they don't necessarily want to hear about Thanksgiving. Even US law firms without an international practice can find themselves swamped around holiday time, as clients race to get legal work done in time to go on vacation. So offshore legal process outsourcing to India has proved to be a blessing especially during the holidays, as the "real Indians" expertly perform legal research and legal drafting, without missing a beat.

August 05, 2011

Three years ago, as reported in a previous post, anti-legal-outsourcing attorney Joseph Hennessey and his Maryland law firm filed a lawsuit against India-based Acumen Legal Services, as well as then-President George W. Bush, in Washington D.C. federal court, claiming that offshore legal outsourcing involves an invasion of privacy. Hennessey and his firm sued on the basis of speculation that the government was intercepting the data sent by U.S. counsel to foreign legal process outsourcing companies, as part of an anti-terrorism campaign. Based on that speculation, the Maryland firm sought a court order against “all United States-based attorneys” who outsource legal work to India, and against "all foreign legal outsourcing providers."

13 days after Acumen filed its motion to dismiss, drafted by a team of Indian lawyers at SDD Global Solutions in Mysore (with further assistance from the team at Acumen), the plaintiff law firm withdrew its case.

Now Mr. Hennessey has a new law firm, and he's shifted his sights from legal outsourcing to US financial institutions, while making the same allegations against outsourcing to India. In June, he filed a class action lawsuit against American Express. Two days ago, he sued Bank of America. "By routing Plaintiffs' [financial information] to foreign national personnel residing overseas, Bank of America affects a forfeiture of the Constitutional and statutory rights that constrain the surveillance by the United States Government," the class alleges.

It seems this attorney is less than thrilled with outsourcing to India. For more information on his latest adventure in anti-outsourcing litigation, see the article on law.com today.

July 01, 2011

In a post on this blog five weeks ago, and in a quote in The Washington Post, we noted that Indian legal outsourcing companies have nothing to fear from India's new data privacy rules, which went into effect last April. The new rules, in the country's Information Technology Act, are surprisingly tougher than data protection laws in the West. For example, they ostensibly require Indian companies to obtain written consent from any individual or company before obtaining sensitive, "personal" data from that individual or company. Regarding legal process outsourcing companies, we noted as follows:

Most LPO service level agreements are already in the form of written contracts that either already are in compliance, or can be amended if necessary. Moreover, one of the keys to understanding the impact of the "written consent" requirement is the fact that it covers only "personal" information [such as credit card numbers, Social Security numbers, etc.], which is not the kind of data that most offshore legal outsourcing companies generally receive.

We also commented that one of the effects of the new rules "may be to help put to rest one of the old 'bug-a-boos' so often raised by naysayers, namely, the story that India, relative to the West, has no legal protection for data security."

Now, the Indian government reportedly has assured outsourcing industry leaders that "the collection of personal data abroad by Indian companies will not come under the new rules, because Indian companies will be collecting this data on behalf of the customer who is abroad and governed by laws in his country." This is a quote from Kamlesh Bajaj, CEO of the Data Security Council of India, which was set up by the National Association of Software and Service Companies (Nasscom), India's IT trade association. Bajaj says the government "soon" will be issuing a clarification to that effect.

If this is true, then the "written consent" problem may be disappearing, even for call centers, IT companies, and other BPO (business process outsourcing) firms. But Bajaj notes that "Indian companies that handle data will however continue to be governed under those parts of the rules that require them to follow stringent security procedures as processors of data."

PC World reports that at least one expert on the subject is skeptical about whether BPOs no longer need to worry about obtaining written consent:

The current rules, which came into force in April, do not make a distinction between Indian outsourcers and their customers abroad, and it would appear that customers abroad will also have to follow the stipulated procedures for the collection of personal data, including seeking written approval from the individuals from whom they collect the data, said Pavan Duggal, a cyber law consultant and advocate in India's Supreme Court.

Our own take on this has been that "those [individuals] usually have binding agreements with the banks, hospitals, credit card companies or other clients that use the call centers, and the clients usually have written agreements with the call centers," so that "[t]he required consents can be in the agreements."

Either way, again, none of this should affect offshore legal outsourcing, which generally does not involve the collection of "personal" information as defined in the rules.

June 24, 2011

The following are excerpts from today's press release from the offices of T.J. Fisher and two of her companies, in connection with a litigation battle with Bank of America, in which the plaintiffs are employing offshore legal process outsourcing (LPO) to level the playing field:

According to court papers filed in the Circuit Court of Palm Beach County, Florida, T.J. Fisher alleges banking irregularities and improprieties caused a domino effect that ultimately led ex-NFL Ravens football player Michael McCrary to file a $60-million lawsuit against her in 2007.

Fisher, who lives in Palm Beach and the French Quarter, listed her company Market Street Properties Palm Beach LLC as co-plaintiff in the BofA action.

The entity holds a pivotal stake in the much-ballyhooed Market Street redevelopment of the iconic New Orleans riverfront Entergy Power Plant property.

A documentarist and social critic with a Bourbon Street house, hat affinity and ‘59 pink Cadillac convertible, the media previously anointed Fisher “suitably outrageous and eccentric to represent New Orleans."

“I’ve been silent for too long,” swore Fisher, “no more. There’s a story to tell that rocks ‘conspiracy’ theories, litigation and banking practices.”

McCrary sued Fisher, her husband and others for $60-million in Baltimore over post-Katrina Crescent City Estates LLC transactions involving the Plaza Tower, a downtown New Orleans 60s-era skyscraper.

The Baltimore state court rendered a $33.3-million civil default judgment against Fisher and the others in the McCrary litigation. Fisher says the judgment was draconian because she and legal counsel were precluded from speaking or participating in the damages hearing.

Fisher says she met McCrary once at a post-Hurricane Katrina surprise birthday party thrown in her honor when her husband hosted a New Orleans celebration of triumph over sorrow and invited McCrary as the guest of honor.

“I was never McCrary’s partner or associate,” Fisher says.

Fisher’s Bourbon Street house and personal possessions were seized in 2009 when she could not post a $33.3-million-dollar bond for the McCrary-Fisher litigation; a court order returned Fisher’s property and McCrary’s default judgment was later overturned.

In filing suit against BofA, Fisher says she intends to establish how the alleged bank account irregularities and unauthorized transactions snared her into the McCrary legal quagmire, with devastating consequences and far-reaching ramifications.

Fisher’s legal team is spearheaded by a former Roy Black protégé and Greenberg Traurig litigation associate, Timothy W. Schulz, Esq., who became lead counsel June 15th.

Schulz participated as co-counsel in a number of high profile trials including the live Court TV broadcast of the murder trial of Victor Brancaccio, which was dubbed the “Zoloft murder trial.”

Schulz previously represented Fisher in Florida litigation that involved McCrary. He successfully blocked McCrary’s $24 million worth of liens against Fisher and her Palm Beach home.

“I intend to present a clear, concise, and simple case, and will establish that BofA was asleep at the wheel which resulted in devastation to Ms. Fisher,” Schulz said.

American Lawyer dubbed SmithDehn co-founder Russell Smith, Esq. “The Maharaja of Media.” As legal counsel for Hollywood heavyweights and the television and film industry, Smith is among the leaders of a paradigm shift in how law is practiced, breaking new ground with transatlantic and transpacific legal support. Harvard Law School alumni Frank Dehn, Esq. joins Smith in heading up SmithDehn operations and overseeing SDD Global’s dedicated legal team.

Schulz’s legal team includes Fisher’s longtime attorneys Richard Winelander, Esq. of Baltimore, who overturned McCrary’s $33.3-million dollar default judgment against Fisher and filed a US Supreme Court writ of certiorari, and Al M. Thompson, Jr., Esq. of New Orleans.

June 22, 2011

In yet another example of how offshore legal outsourcing is not just for documents anymore, an expert team of US-law-trained professionals in India are busy doing legal research and drafting of a legal opinion letter to obtain insurance coverage and distribution in connection with the soon-to-be-released investigative documentary film about Sarah Palin. This film is not to be confused with the puff piece recently produced by a Tea Party activist. The Los Angeles Times reports on both films as follows: "Sarah Palin receives what is by all indications a very kind treatment in a new documentary that will premiere in theaters July 15. But a second, far more scathing Palin documentary is being prepared by a more experienced filmmaker. And it looks a lot more likely to stir the pot."

It is the latter film for which legal outsourcing company SDD Global Solutions has been tapped to provide outstanding, speedy, and cost-efficient legal services, in conjunction with its parent media law firm, SmithDehn LLP. Based on the Los Angeles Times report, it seems that offshore legal process outsourcing is having an impact not only in legal circles, but also in the US political world: "[This] movie could become a lightning rod as Palin either runs for president or plays an important part in defining the Republican Party’s 2012 platform." More information can be found on the SmithDehn LLP blog.

June 10, 2011

The huge cost and burden of discovery abuse is leading yet again to demands for reform, and not only in the US. And the calls for major revision of ediscovery and other rules are not only for the usual reasons. In a bizarre twist, Australia's Attorney-General now has cited legal outsourcing to India as a factor that cries out urgently for change. This is bizarre, because LPO (legal process outsourcing), by increasing speed and lowering costs, actually is part of the solution, not part of the problem. But this latest news does raise an interesting question: If procedural reforms are successful in dramatically reducing the amount of ediscovery and other document production in the US and elsewhere, will this derail the boom in LPO work? The answer is no.

The Wall Street Journal reports today that the Australian Law Reform Commission, with the backing of Attorney-General Robert McClelland, has issued "plans for a major overhaul of civil litigation" that could "slash tens of millions of dollars from the cost of justice":

If implemented, proposals drawn up by the Australian Law Reform Commission would save "millions in just one major case", said Attorney-General Robert McClelland. They could also end what he described as the "farce" that sometimes arises when the process of discovery is taken to extremes in large commercial disputes. "It is almost part of the ritualistic incantation of large litigation," he said. Mr. McClelland said he agreed with the overall direction of the commission's plan, which aims to give judges greater control over the way parties seek documentary evidence from each other during civil disputes.

According the the article, the Commission is proposing the following changes:

Tougher rules governing the use of court-approved "discovery plans" aimed at narrowing the scope of the search for relevant documents.

New training programs for Federal Court judges on e-discovery, which is the technique of finding and retrieving electronically stored information.

Changing the Federal Court rules so judges could use adverse costs orders to encourage a more focused approach to discovery.

Limited use of oral depositions on issues associated with discovery. The commission has proposed that these examinations would only take place with court approval and could concern the existence or location of potentially discoverable documents, and the reasonableness and proportionality of a discovery plan.

More dramatic reforms are being proposed in the United States, where discovery costs have been growing exponentially. These costs amount to a huge "litigation tax" that dries up capital, lowers employment, reduces innovation, pushes many companies into bankrupcty, prevents foreign companies from operating in the US (the most litigation-costly country on earth), and even threatens the preeminence of US securites markets. Discovery costs in the US were approximately $400 million in 2004, but today they amount to billions of dollars per year. This is not even counting the billions that defendants pay in settlements, just to make litigation go away.

Among the changes being urged in the US are the following: (a) requiring courts to consider cost-shifting every time a party makes a demand for electronic discovery, such that the requesting party would have to pay for it, which would defeat the main reason many discovery demands are made: to run up the legal bills of the other side, (b) requiring the loser in any discovery dispute to pay the attorneys' fees and costs of the winning party, and (c) suspending all discovery automatically during the pendency of motions to dismiss, so there would be no discovery in meritless cases.

Calls for discovery reform are not new, but because several previous reforms have failed, even after being implemented, tougher measures like the ones listed above are now being sought. One truly new development is the attempt of Australia's Attorney-General to attack offshore legal outsourcing as if it were part of the problem. As reported in today's Wall Street Journal article:

He said the costs associated with discovery had become so unrealistic that some litigators were outsourcing the process to low-cost centers in India. This threatens legal employment in Australia and potentially erodes the effectiveness of the process. "A lot of the material is sent on a USB drive or emailed to India and you have Indian lawyers who have a limited idea of what is involved in the case sifting through these documents and supposedly finding information of relevance," Mr. McClelland said. "When it gets to that level, it's a farce." Increasingly, this is an item of work that is not being undertaken by Australian lawyers and is being offshored. "It is appropriate that we take stock at this point and just ask, 'Where is all this going?'"

Putting aside the oddity of this government bureaucrat effectively saying that discovery abuse would be fine if Australian lawyers were doing the work, the impending reforms do present the question of what impact they might have on the LPO industry. It is true that the high-quality, efficient document review services provided by such industry leaders as Pangea3, UnitedLex, Integreon, and CPA Global is currently the engine driving most LPO growth. But that is only part of the LPO story, and at some point, it may be considered just a prelude.

In yesterday's lead article in the blog of the Association of Corporate Counsel (ACC), the point is made that "the majority of litigation costs" are not due to discovery, but rather "involve drafting of paperwork and related legal research," and that this "legal work done offshore can be about one-seventh as expensive," such that the implications for growth of LPO from this higher value work "could be huge." The article, aptly titled, "Legal Offshoring Is Not Just for Documents Anymore," is by Kwarma Vanderpuye, Chairperson of the ACC's General Counsel/Chief Legal Officer Practice Group, as well as Senior Vice President and General Counsel of legal outsourcing company SDD Global Solutions. Ms. Vanderpuye reports that LPO offers a legal-landscape-altering solution to the problem of litigation costs:

[C]ompanies are beginning to realize that when it comes to frivolous lawsuits and/or exaggerated damage claims, there is a new, alternative response that could change the legal landscape. Traditionally, the choice has been either (a) an all-too-often pyrrhic litigation battle, in which legal fees end up costing more than a settlement, or (b) an onerously expensive capitulation. Reportedly, there is now a third choice, which sounds like an oxymoron to most in-house lawyers: a cost-effective legal defense.

In conclusion, offshore legal outsourcing is by no means a part of the problem. To the contrary, it is potentially a very big part of the solution, not only to the problem of skyrocketing discovery costs, but also to address the even greater costs of litigation in general. Discovery reform may or may not succeed in reducing the volume and costs of document review. The US "reforms" in 2000 and 2006 did not do so. But in any event, even the strongest of the now-proposed reforms will not eliminate the lion's share of the "litigation tax." For that, LPO companies increasingly will help ease the burden.

June 08, 2011

In its blog, "In-house ACCess," the Association of Corporate Counsel today features an article discussing the advantages of offshore legal outsourcing when it comes to matters way beyond the document review chores that many people associate with LPO:

Legal experts are saying that with the use of offshore legal outsourcing for tasks such as legal research and the drafting of successful motions, companies are beginning to realize that when it comes to frivolous lawsuits and/or exaggerated damage claims, there is a new, alternative response that could change the legal landscape. Traditionally, the choice has been either (a) an all-too-often pyrrhic litigation battle, in which legal fees end up costing more than a settlement, or (b) an onerously expensive capitulation. Reportedly, there is now a third choice, which sounds like an oxymoron to most in-house lawyers: a cost-effective legal defense.

In her article, Ms. Vanderpuye cites and discusses various expert reports, before concluding that the implications of high-end legal outsourcing could be "huge":

Given that the majority of litigation costs involve drafting of paperwork and related legal research, and because legal work done offshore can be about one-seventh as expensive, the implications of this development could be huge. The average large corporation spends $19.4 million per year on outside counsel fees, much of it for litigation. It’s typical for major multinational companies to reserve billions each year for expected legal fees and settlements.

The ACC, with over 26,000 members in 75 countries, is the trade association for in-house counsel, worldwide. The ACC promotes the common interests of its members, provides resources to help save time, money and effort, contributes to their continuing education, helps them succeed in their careers, and provides a voice on issues of national and international importance.

June 03, 2011

In news that may come as a surprise to those who believe offshore legal outsourcing is nothing but a vehicle for the loss of American jobs, it turns out that most of the largest LPOs are hiring hundreds of US lawyers, and they are doing so in the US. As The New York Times reported yesterday, leading offshore legal process outsourcing companies such as Pangea3, Integreon, and UnitedLex all have established significant US operations, which, if they were law firms, would be considered large firms.

For example, Mumbai-based Pangea3, having had operations in New York for years, now has set up a 400-seat facility in Carrollton, Texas. Integreon already has 500 employees in Fargo, North Dakota and elsewhere in the US, with expectations of hiring another 100 this year. For its part, UnitedLex, with 240 employees in the US already, is expanding to a 24,000-square-foot building in Overland, Kansas, so that it can expand its American operations even further. The New York Times reports that "[al]though the industry’s total number of employees in the United States is still estimated to be only in the hundreds, analysts predict fast growth for the field."

In another twist, Indians are training Americans. For example:

In April, Pangea3 sent Kirit Amichandwala, a senior manager from Mumbai, to train new employees in Texas on how to conduct document reviews and other tasks the way the company’s lawyers do in India. The new hires “all have good document review experience,” Mr. Amichandwala said, “but a lot of the processes we follow are pretty unique to us.”

One of Pangea3’s main competitors, UnitedLex, has started regularly swapping teams of lawyers between the United States and India so that employees in both countries can learn to work the same way.

The big challenge is “how do you get a bunch of American lawyers to believe that we might be doing things smarter” by using a process developed in India, said Shelly Dalrymple, senior vice president for global litigation support at UnitedLex.

One American law firm was so won over that it asked a UnitedLex document review manager from India to train its own team in Boston, Ms. Dalrymple said.

US lawyers and law firms who miss the old days, when clients would pay several hundred dollars per hour for armies of inexperienced young associates to pore through millions of pages of dreary discovery and due diligence documents, will continue to complain that legal outsourcing is depriving the economy of high-paying jobs. They strenuously will continue to object to the "commodification" of legal work. And they will complain and that "American salaries for outsourced work, typically in the $50,000 to $80,000 range," are "meager compared with the six figures that new associates might still hope to draw at a big firm."

But the old days are gone, and the old ways never made sense in the first place. No sophisticated client these days will pay hundreds of dollars an hour to a law firm for document coding that can be done by most English-speaking high school graduates after a couple of weeks of training.

Indeed, it is a mystery why some clients apparently are willing to fund even $50,000 to $80,000 in US salaries, plus US overhead costs, for such work. In India, thousands of attorneys at legal "document factories" are eager to provide the same services for a small fraction of the salary and cost, even on night shifts if needed. The work itself is not attractive, to say the least. But in India, it usually beats toiling in the sclerotic Indian legal system, in which court cases can take as long as a quarter of a century to be resolved, and where Indian "advocates" can earn as little as the rupee equivalent of $100 per month, or less, as their starting salary, if they receive any salary at all.

In any event, legal outsourcing, whether offshore, onshore, or nearshore, is not depriving American lawyers of high-paid document review jobs. Those jobs don't exist anymore. They aren't coming back, nor should they. They disappeared, not because of India or LPOs, but because those jobs never made sense. If LPO companies did not solve the problem, someone else would have done it, whether through the expansion of in-house legal departments, or creation of the kind of internal caste system that big law firms now are rushing toward. It is true that offshore legal outsourcing is likely to shake up the law world, but in other ways. For more on that, see the conveniently titled, previous post, "12 Ways Legal Outsourcing Could Shake Up the Law World in the Next Decade."

May 27, 2011

Legal outsourcing expert and industry veteran, Ron Friedmann, from LPO leader Integreon, makes an interesting point in his company's blog: When it comes to the benefits of legal process outsourcing, cost savings are not the whole story. Says Friedmann: "Many lawyers think labor cost savings drives legal outsourcing. We disagree. The real value lies in providers’ deep experience solving lawyers’ problems." In particular, Friedmann points to the "deep pool of legal management, operations, and process improvement experience" that LPOs can provide for their clients:

For example, Integreon management includes former practicing lawyers who pioneered outsourcing, lawyers who managed document review for law firms or for corporations, senior law firm managers such as COOs and CIOs, and process improvement consultants. Hands-on law firm and law department operational experience extends deep into our middle management team. Our competitors could make similar statements.

Drawing a contrast to the business process outsourcing (BPO) industry, which has suffered a "brain drain" of consulting experts who pioneered the industry but have been leaving the field, Friedmann points to the continuing expertise at LPO companies such as Integreon:

This collective wealth of experience gives a provider deep insight into law firm and law department operations and ideas about how to improve practice and support. My Integreon colleagues and I all feel the same sense of “there has to be a better way to do this.” We all sought out a place where we could work closely with lawyers to help them improve what they do and reduce costs.... [T]hat’s us, without the problem of exiting experts.

Friedmann concludes that while labor arbitrage obviously remains an important aspect of LPO, a factor that may be just as significant, if not more so, is that legal process outsourcing companies "improve how lawyers work and how law firms operate":

Of course access to teams of associates in low cost locations is an important benefit for our clients. The real value, however, is our ability to improve how lawyers work and how law firms operate through process improvement and technology. Fortunately, as a still-growing industry with a plentiful supply of experienced legal managers interested in outsourcing, we do not face a brain drain.

World-famous for its back-office support services for some of the most prominent law firms and companies on earth, Integreon is a leader in not only legal process outsourcing, but also BPO (business process outsourcing) and KPO (knowledge process outsourcing). To quote from its own impressive website, "more clients trust Integreon than any other knowledge services firm, including 9 of the top 10 global investment banks, 32 of the AmLaw 50, eight of the top 10 pharmaceutical firms, 11 of the top 50 global brands, and 6 of the top 10 high technology firms." Other significant assets of Integreon include visionary bloggers and LPO experts Ron Friedmann and Mark Ross.

The rules in India’s Information Technology Act govern the collection and use of personal information including banking and medical details. But business leaders in India and the United States worry that they add a cumbersome layer of disclosures such as obtaining written consent from each customer before collecting and using personal data.

But not everyone is worried. The reporter quotes at least one LPO company CEO in favor of the general spirit of the new law, and India's Deputy Minister for Information Technology, Sachin Pilot, defended the new provisions as follows:

[Pilot] dismissed the fears and said that the law addresses a long-pending demand of the IT industry for a legal framework for data protection. More than 2.8 million Indians work in the IT industry, and 9 million people are employed indirectly. “We are aligning ourselves with the global best practices. This law should end all the fears that any global company has about data being unprotected in India,” Pilot said. “Why would we bring a law that will kill our sunrise industry?” A 2010 report by the Data Security Council of India and the consultancy KPMG found that about 60 percent of banking customers who responded to a survey said that information security is a significant concern.

How will this new framework affect legal process outsourcing (LPO)? One effect may be to help put to rest one of the old "bug-a-boos" so often raised by naysayers, namely, the story that India, relative to the West, has no legal protection for data security. Now, as The Washington Post reports, India has data protection laws that arguably are tougher than those in the U.S. and Europe.

But will the "written consent" requirements put off legal outsourcing clients and cause them to go elsewhere besides India? Probably not. Most LPO service level agreements are already in the form of written contracts that either already are in compliance, or can be amended if necessary. Moreover, one of the keys to understanding the impact of the "written consent" requirement is the fact that it covers only "personal" information, which is not the kind of data that most offshore legal outsourcing companies generally receive:

The new measures were designed to ensure that all personal information that a company collects is secure. It obliges those who handle sensitive personal information — like passwords, bank account and credit card numbers, medical records, biometric data — to implement an elaborate technical, managerial, physical and operational information security practice and set up a dispute resolution process.

* * *

“On the face of it, the privacy laws may impose restrictions on Indian outsourcing providers to carry out any process or service for domestic or international clients that require receipt or dissemination of any information that can be termed ‘personal,’ ” said Manoj Malhotra, president of the Business Process Industry Association of India.

What exactly is "personal" data under the new rules? According to Rule 3 of the IT Rules, 2011, sensitive personal data or information has been defined as “information collected, received, stored, transmitted or processed by body corporate or intermediary or any person, consisting of:

(a) password;

(b) financial information such as Bank account or credit card or debit card or other payment instrument details ;

(c) physical, physiological and mental health condition;

(d) sexual orientation;

(e) medical records and history;

(f) Biometric information;

(g) any detail relating to the above clauses as provided to body corporate for providing service; and

(h) any of the information received under above clauses by body corporate for processing, stored or processed under lawful contract or otherwise...."

LPOs are not call centers, and legal outsourcing lawyers and other LPO employees hardly ever obtain the above kind of information over the phone from clients or customers of clients. Call centers may worry about the new rules because their employees, by contrast, frequently receive personal data from client customers over the phone. But those customers usually have binding agreements with the banks, hospitals, credit card companies or other clients that use the call centers, and the clients usually have written agreements with the call centers. The required consents can be in the agreements.

Other aspects of the new rules not applicable to LPO companies include what appear to be some onerous restrictions and obligations imposed on Internet providers:

Google has protested some sections of the rules, which make Internet intermediaries responsible for any objectionable content, which is defined as “harassing,” “grossly harmful” or “ethnically objectionable.”

Google and other critics seem to have a good point here, but not one that relates to legal process outsourcing.

However, back to the issue of data security in relation to LPOs, ultimately the best protection lies in rigorous employee screening and motivation. The new legal rules, and more importantly, the kinds of onerous procedures that some companies use to police their employees, will do little if anything to help. In the name of “data security” and “confidentiality,” employees at some outsourcing companies are treated more like prison inmates than professionals. They are frisked as they enter and leave, CCTV cameras and keystroke monitoring software are trained on their every move, internet-usage is banned, and permission must be obtained to go to the toilet. But unless a company performs full body cavity searches, how can frisking or similar intrusions stop someone from walking in and out with a pen drive or a small camera? Ultimately, the best defense for data security and confidentiality is a cautiously chosen, meticulously screened, and highly motivated team of employees who are not treated as lawbreakers, and who see their career future with their company. Employees of that kind, whether in the West or in India, are the least likely to be involved in data theft or confidentiality breaches.

May 18, 2011

This is the topic for an upcoming ALI ABA seminar (by the American Law Institute / American Bar Association). The choice of topic speaks volumes. As the brochure for the seminar says, a "seismic shift to a buyer's market for legal services has transformed the business of law firm revenue generation." The seminar faculty includes partners from BigLaw firms, and the organizers quote Dan DiPietro, head of Citi Private Bank Law Firm Group, regarding the following "three harsh realities: (1) demand for legal services, especially for full-price U.S. law firms, is trending downward, (2) law firm billing rates are trending downward, and (3) cost-reduction strategies (by which PPP levels were sustained in 2009-2010) are exhausted and not repeatable."

The organizers argue that "[s]ustaining PPP [profits per partner] levels must, ultimately, come at the expense of other firms." However, no mention is made of LPO in the brochure. This is despite the fact that offshore legal outsourcing is one way for law firms to distinguish themselves and attract new clients. Perhaps legal outsourcing is one of the strategies to be revealed at the seminar!

As we noted in a blog post earlier this year ("12 Ways Off-Shore Legal Outsourcing Could Shake Up the Law World in the New Decade"), "if law firms can't adapt to a client-centric world and start living up to the values and practices of the companies they represent, they will be toast." On the positive side, "[i]n the new decade, smart law firms will continue to form new models, adapt to change, embrace legal off-shoring, and learn how to make all of this serve not only the interests of their clients, but their own."

Meanwhile, stark facts from the real world tend to inject themselves into the debate. LawWeek magazine recently reported that UK construction giant, Balfour Beatty, "is set to review its roster of UK legal advisers, [and] planning to ramp up its use of legal process outsourcing (LPO)." The company uses 24 law firms worldwide. One of them said this: "The motivation for the review is to cut costs, and law firms need to respond by developing innovative outsourcing initiatives. LPO is on its way in, and there is nothing we can do about it, but being able to supervise our own outsourcing is the lesser of two evils."

BigLaw partners can and should discuss various strategies to increase revenues. But "when clients are in the driver's seat," it is the clients who will have the loudest voice. If law firms want to keep clients and attract new ones, they cannot afford to ignore offshore legal outsourcing.

May 05, 2011

In a novel twist, introducing yet another facet of globalization in legal services, a Hollywood entertainment lawyer and client of an Indian legal process outsourcing company has joined the LPO's parent law firm and is helping that firm expand its practice. This is another example of how offshore legal outsourcing has helped a Western law firm grow, rather than decrease the firm's headcount or revenues.

India-based SDD Global Solutions is already known for the legal work it does for major Hollywood film and television studios and other entertainment clients, thanks to its involvement in high-profile projects like "Borat" and "Bruno," and the much-publicized Los Angeles court victories the LPO helped win. SDD Global already has received 14 screen credits in films and television series. Most of the company's work involved sophisticated legal research and the drafting of legal memoranda and court papers. The high-value nature of the work may be one reason the company has been ranked the #1 outsourcing company in India, the UK, and the US, ahead of 2,700 other providers, according to the most recent survey of 6,547 clients by the Black Book of Outsourcing.

But behind the accolades and headlines, SDD Global has been developing a strong capability and track record in yet another arena: the drafting of a full range of contracts for film, television, and other media and corporate clients.

Now, SDD Global's offshore legal process outsourcing work in these sectors is getting a major boost, as one of its clients, veteran Hollywood entertainment lawyer Jeff Holmes, has joined SDD Global's parent law firm, SmithDehn LLP, allowing the firm to open an office in Los Angeles for the first time. The addition of Holmes complements the work SmithDehn and SDD Global have done for an already growing Hollywood clientele, which has included many of the largest players in the entertainment business.

Abhinav Chandan, head of SDD Global's Commercial Transactions Department and a key member of its contract-drafting team in the film and television industries, speaks about this development as follows: "Adding our client Jeff Holmes to our parent law firm in Los Angeles helps us get and perform more work for Hollywood. We look forward to working closely with Jeff as he helps further expand our already growing transactional capabilities."

Indeed, parallel with this latest move, significant television and film production companies already have reached out to SmithDehn LLP to obtain low-cost, high-quality, contract-drafting work relating to deals with U.S. broadcasters and distributors, using the offshore legal outsourcing services of SDD Global. Says Chandan: "This adds to our confidence that Jeff's involvement will increase the variety of media and entertainment related work we do."

Credentials of Holmes Are Impressive

Holmes brings to the table considerable experience in every aspect of legal work for television and film production companies and projects. As Executive Vice President of MGM Worldwide Television, Vice President for Business Affairs at Twentieth Century Fox, and COO and Executive Vice President of Skouras Pictures, and in the course of his later private practice, Holmes has become an expert in the field.

At MGM, where the Chairman of the Board publicly described Jeff as the company’s “superstar," Holmes reported directly to the President and was responsible for all legal aspects of the company's television division. In particular, Holmes negotiated and oversaw the administration of TV output and volume licensing agreements (including such deals as the renewal of the MGM/Showtime pay-TV output agreement in the United States — one of the largest deals in MGM’s history). Holmes also helped establish and supervise the administration of MGM's interests in basic and pay TV channels in Latin America (CineCanal, Telecine, and MGM Networks Latin America), Portugal (Telecine Portugal), Japan (Star Channel), Australia (Optus), Israel (TelAd), India (Zee), and Turkey (Digiturk). Holmes also negotiated co-production and acquisition agreements for films and TV series, supervised and resolved the day-to-day issues of MGM's TV and advertising sales offices in New York, Chicago, Atlanta, Miami, Toronto, London, Sydney, and Hong Kong, and handled issues involving MGM’s Technical Services, Rights Clearance, and Contract Administration departments.

At Twentieth Century Fox, Holmes created and implemented a program to acquire distribution rights to independent feature films, negotiated and drafted TV output agreements throughout the world, negotiated and drafted co-production and format agreements, administered acquisition of third party libraries (involving a wide variety of contract, collection, and agency issues), and supervised in-house counsel.

At Skouras Pictures, the distributor of acclaimed films such as “My Life As A Dog,” "The Comfort of Strangers," and "Blood Simple," Holmes reported directly to the CEO, and managed all aspects of production, acquisition, distribution, financial planning, business affairs, and legal functions. Holmes also was a member of the Board of Directors, participated in taking the company public, and negotiated and implemented a wide variety of agreements, including pay, pay-per-view, syndication, and basic television agreements, international sub-distribution licenses, an acquisition and distribution agreement with Paramount Pictures (under which about 30 first-run films were acquired and distributed), a series of joint venture acquisition and distribution agreements, financing agreements, and an asset purchase agreement for the sale of the company's film library. Holmes also oversaw motion picture production (including the negotiation of interparty agreements, talent negotiations, and budget review), and prepared and implemented significant overhead reductions, while liaising with outside counsel, auditors, producers, sub-distributors, and lenders.

SDD Global's Wide Range of Transactional Services

As discussed above, SDD Global has been developing its contract-drafting and other business transactional capabilities for years, especially in the areas of film, television, and other media. As production budgets have shrunk due to cost-cutting pressures, offshore legal outsourcing with SDD Global has become a welcome means of reducing legal expenses. In some situations, the role of SDD Global has made the difference in allowing otherwise too expensive independent film and television projects to go ahead. Below is a list of the types of legal services that SDD Global provides (sometimes with Western lawyers at its parent law firm stepping in where legal advice is necessary):

research/reports on US compliance issues

litigation and/or litigation support

out-of-court resolution of claims

AccuMark title searches/reports

title opinions

other legal opinions/clearances

trademark and copyright registrations

production agreements

commissioning agreements

talent agreements

writers' agreements

director's agreements

actors' agreements

music producer's agreements

cinematographer's agreements

casting agreements

location agreements

appearance consent agreements

deal memos in advance of agreements

insurance agreements

soundtrack agreements

all types of licensing agreements

music/composition agreements

stills/clips agreements

online channel streaming agreements

same for other 3rd party platforms

sales/acquisition agreements

chain of title searches/reports

distribution agreements

financing agreements/PPMs

agreements for live shows/performances

first look agreements

option agreements

U.S. work permits/visas

crew deal memos/agreements

presenter's agreements

shareholder agreements

completion bond agreements

E&O and other insurance applications

lab access letters

bank mandates

Many people in the Western legal world associate offshore legal outsourcing exclusively with lower-level, lower-value work such as document coding, contract review, and the like. The expansion of SDD Global into new areas of high-end work, even beyond the sophisticated legal research and the drafting of court papers by which the company first made its mark, is yet another reason for the legal industry to take notice of how "LPO" can move, and already is moving, up the value chain.

April 21, 2011

In a recent interview with Daily News & Analysis, Sanjay Kamlani, co-founder and co-CEO of Pangea3, a leading offshore legal services provider based in Mumbai, India, offered some interesting insights on the future of the legal process outsourcing / LPO industry. Pangea3 was recently acquired by the $13 billion news and business information company, Thomson Reuters. Mr. Kamlani believes that the aquisition of his company has increased the credibility and the stability of the LPO industry. He adds:

Prospective clients like top law firms were concerned about the viability of this industry. Now the acquisition has made it clear that this is a serious industry.

Mr. Kamlani also made the interesting observation that top Indian IT and BPO companies are looking to acquire companies that provide offshore legal services. He says:

They view LPO as opportunities to go up the value chain and add a new vertical.

Mr. Kamlani also clarified that although LPO providers cannot perform Indian legal services for Indian clients, the industry is otherwise going global, with clients spread out all over the world (Law Without Borders!), giving employees the opportunity to travel widely, similar to their counterparts in the Indian IT industry.

----------------------------------------------------

* Vidya Devaiah is Managing Director of the legal outsourcing company SDD Global Solutions, ranked in the 2010 Black Book of Outsourcing survey of 6,547 clients as the top outsourcing company in India, the US, and the UK, ahead of 2,700 other vendors.

April 20, 2011

How does this relate to offshore legal outsourcing or legal process outsourcing? It doesn't! But they say you should write about what you know. For the last three weeks or so, that's trekking in Nepal. Also, "Law Without Borders" often means a chance to travel in Asia. So here goes:

1. If you have time, become friends with your guide before hiring him (or her). Then you can say important things, like "shut up."

2. If a chicken walks into a Nepali restaurant, don't make a clucking sound, thinking this is funny. The chicken will jump on your table.

3. If you are female, and your guide asks if he can touch your legs, report him, after firing him. If you are a male, get something in return, like a foot massage.

4. Tired is usually just a state of mind. Turn on your iPod, and don't be embarrassed if you start making dance moves while climbing, even after you've already been at it for seven hours.

5. If you see a sign saying something is only "15 minutes ahead," this means four hours.

6. "We have hot showers" often means: "We have a little, bare, concrete room, 3 feet by 3 feet, and you can order in advance for a bucket of warm water."

7. "Attached bathroom" means: "There is a bathroom down the hall. You (and everyone else) are welcome to use it." By the way, Nepali/Indian-style toilets, which involve a porcelain hole in the floor, work better than Western ones. Things come out easier, and while taking a dump, you are also doing a yoga pose.

8. If the owner of the guest house tells you there is a wild dog outside, and that you should run, not walk, from the restaurant to the rooming house, believe it. Also, do not try to make a joke by barking. Unless you are so cold and exhausted that you don't mind being knawed and chewed to death.

9. Be sensitive to national differences. If you are sitting next to a Japanese trekker at dinner, and someone spills their beer, causing a small, foamy wave to rush down the table, don't say "Uh-oh! It's a tsunami!"

10. If you expect the country, topography, and people of Nepal will be beautiful, you are in for a surprise. They are not beautiful. They are stupendously and astoundingly beautiful.

February 25, 2011

In the latest legal outsourcing news, Indian LPO lawyers are getting new competition from a surprising location: Northern Ireland. Yes, it's an outrage! Western law firms are shipping LPO jobs, which otherwise might have gone to India, to the Irish!

A flurry of reports indicate that UK mega law firms Allen & Overy and Herbert Smith both are setting up legal support offices in formerly war-torn Belfast in the coming months. The outsourced jobs will include not only hundreds of back-office clerical positions, but also over 75 fee-earning legal jobs.

Despite an old reputation for "their tanks and their bombs, and their bombs and their guns" ("Zombie"), the North of Ireland is a beautiful part of the world, with a youthful, highly educated, English speaking population, eager for knowledge-based jobs. A double-whammy of globalization and open street warfare practically ended the manufacturing sector that was once the heart of Belfast's economy, leaving massive unemployment. But while Belfast, Derry, and the rest of Northern Ireland are among the most economically depressed areas of Europe, payscales and operating costs are still many times higher than those of India. So how did Belfast win the competition?

Well, it didn't hurt that "Invest Northern Ireland," the government's development agency, made an offer the London firms could not refuse. It agreed to pay Allen & Overy 2.5 million Pounds to set up its new "Support and Legal Services Centre," and to pay 208,000 Pounds to Herbert Smith to launch its document review/due diligence operation. Given that these two "magic circle" law firms collectively brought in over 3 billion Pounds last year in fees, the Belfast location incentives make these firms among the wealthiest government aid recipients in the world. The government hand-outs amount to about 8-10,000 Pounds for each job created.

The Indian government, which next month is scheduled to abolish a years-long service tax holiday for legal outsourcing and other IT-enabled services ("ITES") companies, had better take notice. Certainly the Government of India will not be paying bribes to rich Western law firms or companies to set up shop in India. (In India, bribes are paid to the government, not by the government.) But next month does not seem to be an especially smart time to start imposing new taxes on the still nascent but growing legal process outsourcing industry, when it faces competition from not only Northern Ireland, but also the Philippines and South Africa.

February 22, 2011

David B. Wilkins, Harvard Law School Professor and Director of Harvard's Program on the Legal Profession, is no stranger to offshore legal outsourcing. It was Wilkins who famously told The New York Times that “[t]his is not a blip; this is a big historical movement.” Referring to the recent changes in the Western law world, including the rise of legal process outsourcing (LPO), Wilkins said that "it is quite likely that we will look back on this period as one of less dramatic change than the period that is coming."

At the American Bar Foundation's recent Annual Fellows Awards Banquet in Atlanta, Professor Wilkins made news again, using the occasion of his keynote speech to not only accept the ABF's Outstanding Scholar Award, but also to announce a groundbreaking new research project, called "Globalization, Lawyers, and Emerging Economies," or GLEE. The ABF is the research affiliate of the American Bar Association, and the GLEE initiative will involve a comprehensive study of the growing legal services market in developing economies such as India, China, and Brazil. In his keynote address, Wilkins noted as follows: "Globalization dominates our world. Burgeoning economies are going to challenge the economies of the United States and other G6 countries." Wilkins said the "GLEE" project will be a combined effort among Harvard Law School; the University of Wisconsin, Madison; and law schools in India, Brazil and China.

Among his other credentials mentioned above, Wilkins is the Lester Kissel Professor of Law and Vice Dean for Global Initiatives on the Legal Profession at Harvard Law School. He is a Senior Research Fellow of the American Bar Foundation and a Faculty Associate of the Harvard University Edmond J. Safra Foundation Center for Ethics.

Wilkins has written over 60 articles on the law profession in leading scholarly journals as well as in the mainstream media, and he is the co-author (together with Harvard Law School colleague Andrew Kaufman) of one of the leading casebooks in the field, Problems in Professional Responsibility for a Changing Profession. His current projects on the legal profession include After the JD, a ten-year nationwide longitudinal study of lawyers' careers, in collaboration with the ABF and the National Association of Law Placement. Wilkins is also currently developing a quantitative and qualitative examination of how corporations utilize legal services, an empirical project on the development of "ethical infrastructure" in large law firms, based on a series of focus groups with leading practitioners and regulators, as well as over 200 in-depth interviews in connection with an upcoming Oxford University Press book on the development of the black corporate bar.

Professor Wilkins teaches several courses on lawyers and related professionals, including the country's only four credit course on the legal profession, entitled "Legal Education for the Twenty-First Century: Global Perspectives on Preparing Lawyers for Global Careers,” and seminars on The Future of the Large Law Firm.

As you no doubt already have gathered, Professor Wilkins is one of the leading thinkers on the topic of the future of the legal profession. His embrace of the growing reality of offshore legal outsourcing further confirms its importance to the legal world.

February 06, 2011

In an article three days ago ("Connecticut May Spoil Party for LPOs in India"), The Times of India reprinted a recent story from The Economic Times, reporting as follows:

[A legislator in the] US State of Connecticut has introduced a bill designed to prevent law firms and corporates from offshoring the drafting, reviewing and analysing of legal documents to workers overseas. This could impact the legal process outsourcing (LPO) sector in India. LPO players are also worried that other US states may pick up the cue from Connecticut.

Actually, if any LPO players are worried, there is no cause for it. The chances of this misguided piece of proposed legislation passing, or being upheld by the courts if it somehow were to pass, are about zero.

The proposed law (HB 5083), introduced by State Representative Patricia Dillon, would amend Connecticut Gen. Stat. §51-88 “to provide that the practice of law includes (1) drafting, reviewing or analyzing legal documents for clients in this state, and (2) researching and analyzing the law of this state and advising clients in this state of the status of such law, and that any person who has not been admitted as an attorney in this state who performs such activities commits the offense of the unauthorized practice of law.”

There are at least four reasons why the flaws in this bill are fatal -- to its chances of becoming law, not to offshore legal outsourcing:

First, because many thousands of paralegals (not admitted to the bar, by definition) and beginner associates (many not yet admitted to the bar) are drafting and/or reviewing legal documents and/or performing legal research, the proposed legislation would ban more jobs in the U.S. than it would in India.

Second, the offshoring or nearshoring or in-sourcing of this kind of work to paralegals and other professionals not admitted to bar in the U.S., whether those professionals are in the U.S. or India, is not only of benefit to clients (who end up paying less in fees), but it also helps lawyers (by lowering their own costs, increasing their flexibility, and giving them a fighting chance to win and keep clients). That's why every bar association ethics panel that has spoken on this issue (more than half a dozen across the country so far, including that of the ABA) has come down in favor of this same kind of legal outsourcing that would be banned by this bill proposed by a non-lawyer. In short, there is no serious constituency for this proposed law.

Third, although the bill's sponsor says she is concerned about the "quality" of the work being done overseas, she fails to understand that supervision and quality control regarding offshore legal process outsourcing is one of the well-recognized duties of lawyers themselves, in Connecticut and elsewhere. So the bill serves no worthwhile purpose, and it would actually take away one of the more useful roles that lawyers are providing now.

The mostly untapped market for affordable legal services (a phrase now widely seen as an oxymoron) is vast.... [W]hen offshore legal outsourcing allows otherwise unaffordable court cases to be opposed or prosecuted, and deals to be done, most of which require Western lawyers to supervise and implement, the amount of work for Western lawyers will go up, not down.

Regarding the bitter and continuing complaint that legal jobs are lost in the U.S. because they are outsourced, [Case Western Reserve University] law professor Cassandra Burke Robertson concludes otherwise, in her law review article ["A Collaborative Model of Offshore Legal Outsourcing"]. She cites facts to support her point that offshore legal outsourcing "creates more jobs than it eliminates... [and] the cost savings achieved from offshoring lower-level work may create more high-end jobs onshore."

Even the offshoring of high-value work creates job opportunities in the West. Deals previously undone, and litigations previously settled (or never filed), due to previously excessive legal costs, become suddenly affordable. Affordability means more work for the Western lawyers involved in supervision, editing, negotiating, and/or appearing in court.

We are not alone in our critique of this bill. In a recent article in the Connecticut Law Tribune, several legal experts were quoted in opposition to the proposed legislation:

Legal experts doubt whether the Connecticut legislature can do anything to stem the tide. “The whole business of lawyering is going to change, and is changing right before our eyes,” said Frederic Ury, of Ury & Moskow in Fairfield, who serves on the American Bar Association’s Commission on Ethics 20/20.

“You can’t look at the profession and try to go backwards… We’re just like every other industry that’s in the midst of a paradigm change,” said Ury. “Legal services overseas are really in demand.”

Ury noted that the ABA gave the practice of outsourcing legal work its blessing in 2008.

The ABA said at the time that outsourcing “affords the lawyers the ability to reduce their costs and often the cost to the client to the extent that the individuals or entities providing outsourced services can do so at lower rates than the lawyers’ own staff.” The ABA also said outsourcing created new opportunities for smaller firms to handle larger matters.

Connecticut's legal trade newspaper concluded in the article that "the general consensus is that overseas legal work is here to stay":

“We as an industry have shown that a lot of basic legal support work can successfully be done offshore very cost-effectively with no quality problems,” Mark Ford, of the global law firm Clifford Chance, recently told the New York Times. “Why on earth would clients accept things going back?”

And the criticism of the bill is not limited to LPOs, big law firms, or the legal establishment. Lisa Solomon, a well-respected, freelance attorney and commentator said the following in an excellent blog post on this subject:

This sloppily-drafted bill... ignores the substantial body of principled analysis of the issues surrounding legal outsourcing in favor of facile protectionism that won’t cure the legal profession’s real ills.

As for the status of the bill? Rep. Dillon says the Connecticut General Assembly’s Judiciary Committee will take a look at her proposal, and that a public hearing is likely to be scheduled.

February 03, 2011

As far as we know, there are only two organizations that annually rank legal process outsourcing (LPO) companies, namely, The Black Book of Outsourcing and the India Business Law Journal. These two respected sources use very different methodologies, and in fact, they measure different things. The Black Book, now owned by the Datamonitor Group, decided in 2010 to rely entirely on verified responses from a survey of 6,547 clients, regarding client satisfaction alone. In that survey, which evaluated over 2,700 vendors in all categories of outsourcing, only four legal outsourcing companies were ranked among the "Global Top 50" (and only the top 50 were identified). The IBLJ, in its 2010 "LPO Awards," evaluated only Indian legal process outsourcing companies and relied upon "a combination of objective data [from a survey of 700 clients] and subjective analysis," including "submissions received from LPO service providers."

"Law Without Borders" is plunging into this field to provide a third perspective, and to resuscitate the tradition of the "top ten" LPO list, which no other organization is now offering. We admittedly are biased, because this blog itself is run by an LPO provider, SDD Global Solutions, which is the only company focusing almost exclusively on less popular, but higher value outsourced legal services, such as legal research and legal drafting. However, our own "Top Ten Guide" is probably accurate, because, like most industry insiders with five or more years of experience in offshore legal outsourcing, we actually know what we are talking about. But to add some objectivity, we are limiting our "Top Ten Guide" to providers already chosen by either the 2010 Black Book survey or the 2010 IBLJ LPO Awards. This is somewhat self-serving, since our own company was ranked very highly by clients in the Black Book survey. Having said all that, below is our probably accurate guide to the world's top ten legal outsourcing companies:

THE LEGAL OUTSOURCING COMPANIES LISTED IN THE 2010 BLACK BOOK OF OUTSOURCING SURVEY:

This outstanding, Philippines-based, global provider focuses primarily on e-discovery and other document review services. American Discovery ranked #1 in the 2010 Black Book survey, making it the top outsourcing company in the world, according to the thousands of clients that participated. On its website, the company says that "[w]ith several offices throughout the United States, Asia-Pacific, and Western Europe, American Discovery employs a globally-integrated service model perfected by interconnected infrastructure, personnel, and U.S. legal expertise."

Ranked the #1 outsourcing company in India, the US, and the UK, according to the 2010 Black Book survey, SDD Global is the only legal outsourcing vendor managed by a U.S. law firm. It is also the only LPO focusing almost exclusively on high-end, knowledge-based legal services, such as contract drafting, legal research, and preparation of briefs, motions, and other litigation papers. SDD Global made its mark handling complex legal analysis and drafting for major Hollywood and London film and television studios and production companies. More recently, it has become the "LPO of choice" for countless North American law firms and solo practitioners, as well as non-media companies.

Known for its application of technology-powered solutions, this Kansas-headquartered, global LPO has been named the #4 outsourcing company in the world, according to the Black Book. With over 650 professionals, UnitedLex specializes in e-discovery, document review, and contract review and management, among other services. In its own words, "By combining Early Case Assessment, Data Collection and Forensics, Document Processing, Online Data Hosting, Attorney Document Review, Document Production, and End-to-End 30(b)(6) Testimony into a single service offering, UnitedLex provides counsel with accurate results and predictable costs."

This LPO leader, which recently made world headlines through its $100 million acquisition by Thomson Reuters, hardly needs an introduction. Since 2003, Pangea3 has been a pioneer in the legal outsourcing industry, first attracting attention for its patent services, then focusing primarily on document review, and now starting to branch into just about every kind of legal work. In addition to being one of only four legal process outsourcing companies included in the Black Book's Global Top 50 results, Pangea3 has won the IBLJ's "LPO of the Year" award for two years in a row.

Another "mega-LPO," this leading legal outsourcing provider turned heads worldwide, when mining giant Rio Tinto hired it to handle millions of dollars worth of Rio Tinto's legal work, and again when it attracted GBP 440 million in investment, for only a minority stake in its operations. Jersey-headquartered CPA Global, like Pangea3, is clearly one of the "elephants in the room" when it comes to Western legal services.

A perennial award-winner, Mindcrest is truly one of the few pioneers of the industry, opening its doors in 2001. Known primarily for its expertise and leadership in the document review field, this highly successful provider bills itself as "the largest and most established legal support services company."

Founded in 2004 by the legendary Ram Vasudevan, New York-headquartered Quislex is another trailblazer of the legal outsourcing industry. Focusing primarily on document review and contract management, among other services, Quislex uses proprietary Six Sigma methodologies to attract major clients and keep its many professionals busy in Indian metros Pune and Hyderabad.

World-famous for its back-office support services for some of the most prominent law firms and companies on earth, Integreon is a leader in not only legal process outsourcing, but also BPO (business process outsourcing) and KPO (knowledge process outsourcing). To quote from its own impressive website, "more clients trust Integreon than any other knowledge services firm, including 9 of the top 10 global investment banks, 32 of the AmLaw 50, eight of the top 10 pharmaceutical firms, 11 of the top 50 global brands, and 6 of the top 10 high technology firms." Other significant assets of Integreon include visionary bloggers and LPO experts Ron Friedmann and Mark Ross.

This frequently award-winning LPO is led by the brilliant and highly persuasive Harvard MBA graduate Abhi Shah, who, although not a lawyer (and perhaps in part because of that), was one of the first to recognize the potential of legal process outsourcing. The Clutch Group specializes in services relating to discovery, contract management, due diligence, and compliance, among others. We also like its marketing slogan, "Smart Solutions, No Borders."

Founded by partners of the justifiably prominent Indian law firm, AZB, as well as the Patni family, known for their leadership in the Indian IT industry, Bodhi Global has offices in Mumbai, Pune, and New York. Led by Arihant Patni, this excellent LPO handles "litigation support, contract review, drafting and management, corporate due diligence for mergers and acquisitions, real estate, and legal and regulatory research."

February 01, 2011

A leading global law firm, Morrison & Foerster, has just issued a report, entitled "Global Sourcing Trends in 2011," in which the firm comments on the "dramatic expansion" in the "embrace" of offshore legal process outsourcing "by corporate law departments and by large US law firms." The report is based on what the firm's sourcing partners "have seen in their outsourcing projects during 2010, as well as on the views expressed by service providers, outsourcing consultants, and clients." In particular, the report's authors note that "available services are multiplying" at offshore legal outsourcing companies, and that the work is growing in complexity and "moving up the food chain of legal services":

While legal process outsourcing, or LPO, has been around for some time, the last two years have witnessed a dramatic expansion in its embrace by corporate law departments and by large US law firms seeking to address recessionary pressures. While work performed by LPO firms historically consisted of basic tasks such as contract review, contract management and transaction support services, available services are multiplying and moving up the food chain of legal services to include substantive patent work, legal research and contract preparation. As a sign of a robust LPO market, financial and strategic buyers have been acquiring stakes in LPO firms.

The report cites as evidence two major outside investments in legal outsourcing providers, including the GBP 400 million investment in CPA Global, and the $100 million acquistion of Pangea3:

In February 2010, Intermediate Capital Group acquired an interest in CPA Global, a leading LPO firm founded in the UK in 1969 originally to manage patent renewals. In November 2010, Thomson Reuters acquired Pangea3, a leading LPO provider headquartered in New York and Mumbai.

On the LPO subject, the Morrison & Foerster partners conclude as follows:

Predictions of the growth of LPO vary by source, but there appears to be consensus that growth will be robust in 2011. Our experience is that corporate law departments and law firms alike are coming to view LPO as a means of reducing expenses in areas where offshoring is not viewed as presenting unmanageable risks. We expect the trend to continue.

Morrison & Foerster has been included on The American Lawyer’s A-List for the last seven years. Another distinction for the firm is that Fortune magazine listed it as one of the “100 Best Companies to Work For.”

January 28, 2011

The ABA Journal, a respected trade publication of the American Bar Association, reports on what seems to be the latest example of nearshore or onshore legal process outsourcing. In particular, the article, entitled "Thomson Reuters Hiring Attorneys for New LPO Outfit in Michigan," suggests that Thomson's legal outsourcing subsidiary, Pangea3, is hiring U.S.-bar-admitted attorneys to manage document review projects at a new LPO facility in Ann Arbor:

When we reported Thomson Reuters’ acquisition of Indian legal process outsourcing company Pangea3 in the February issue, the publishing giant hadn’t yet disclosed where it would build document review centers in the U.S., aimed to mirror those overseas.

This week, however, we discovered a Thomson-Pangea3 post on job-search website Monster.com (JPG) looking for full-time and temporary, experienced contract attorneys to staff a new facility in Michigan on March 1.

The company is hiring lawyers “barred in any U.S. jurisdiction” to “build multiple document review project teams” in “anticipation of establishing a document review facility in Ann Arbor, Mich.,” according to the Monster job post.

When we inquired about the number of lawyers to be staffed at the Ann Arbor center and asked whether any other U.S. facility locations have been planned, Thomson provided a vague response.

"As we've mentioned, we see a multishore, 24/7 operating structure as key to supporting Pangea3 customers in all parts of the world. We're working on this now, and will keep you posted as things progress," a company spokesman wrote in an e-mail.

January 17, 2011

Many good points already have been made about what offshore legal outsourcing (or legal process outsourcing/LPO) has achieved in 2010, and what it is likely to contribute in 2011. But this is not just a new year; it's a new decade. This second decade of the 21st century is the one in which the legal world, as we know it, might be turned upside down. Along with related factors, offshore legal outsourcing is likely to continue to be among the leaders of the law revolution. Let us count the ways:

1. Meritocracy Beats Aristocracy

In the new, client-centric legal world, legal services providers can no longer rely on privileged positions. They can no longer depend on unwavering acceptance of the old model, which Cisco General Counsel Mark Chandler famously described as "the last vestige of the medieval guild system to survive into the 21st century." Lawyers and law firms must deliver value. That's what high-quality, offshore legal outsourcing is all about. This is the number one reason why the LPO (legal process outsourcing) sector is likely to continue to boom throughout the new decade.

The Association of Corporate Counsel (ACC), in effect the trade association for in-house legal departments worldwide, has noted that "[f]or the past two decades, there has been an unrelenting drive by companies and their suppliers to reduce costs while increasing quality and value in their products and services. The only outlier seemed to be the law firms." In response, the ACC has instituted a "Value Challenge... based on the concept that firms can greatly improve the value of what they do, reduce their costs to corporate clients and still maintain strong profitability."

The old days when clients would simply roll over and accept the cost burden of the "pyramid structure" of large law firms, under which clients traditionally have been asked to pay a king's ransom for massive hourly billing by an army of junior associates at the bottom, who do not know what they are doing, and who, as a result, conveniently bill more hours, increasingly are just that: "old." As reported in The Economist: "American law firms typically get fresh law graduates to do such grunt work and then bill clients for it at steep rates. But the recession has prompted clients to rebel. A recent survey by the American Lawyer found that 47% of large firms had seen clients refuse to have hours billed to beginner lawyers."

Nevertheless, a number of large law firms have been somewhat slow to catch on. Legal industry expert Jordan Furlong explains as follows: "LPOs failed to interest law firms with their promise of good legal work at low prices, but they captured the full attention of — and millions of dollars in work from — clients. LPOs represented the first legitimate third-party option for legal work, and their impact is only starting to be felt." As Furlong goes on to note, "[t]hese are unprecedented times for the legal profession, as our marketplace makes the difficult but necessary transition from a 20th- to a 21st-century model. Fasten your seat belts, because it’s going to be an increasingly bumpy ride."

This observation is seconded by a leading Australian newspaper, which reports that "[t]he legal profession is on the cusp of unprecedented change and legal services outsourcing is at the forefront of that change.... While there are still some in the legal profession who believe they can hold back the tide -- or who hope the force of change will die down to a mere ripple on the ocean -- the truth is corporate clients are ready for a radical sea change in the way legal services are provided. They have seen a new way of working and are not going back to the old way."

A continuing refrain from legal practice management experts is that Western lawyers and law firms need to start operating with the value-based metrics of a business. As lawyer and columnist Mitch Kowalski observed in Canada's Financial Post, with particular reference to the rise of offshore legal outsourcing: "It is well past time to face the fact that law is a business. And we better start acting like businesses, or soon, we’ll all be 'out of business.'"

The same warning is coming not only from outside commentators, but also from the managing partners of "BigLaw" firms themselves. Robert Ruyak, Managing Partner of Howrey, one of the world's top 100 law firms - a firm that recently lost 60 partners and may not see the end of 2011, according to some pundits - says: “It’s time for firms to start acting like other businesses - it’s a new world and you have to adjust."

Similarly, Tony Williams, the former Managing Partner of Clifford Chance, another large global law firm, has advised that for law firms, "creating links with legal process outsourcers (LPOs).... will be essential to dampen the effects of unpredictable markets."

What is the connection between law firms "acting like other businesses," and the use of offshore legal outsourcing? For starters, there is probably not a single Fortune 500 company that has not been outsourcing work to India for years. The business world knows well, what law firms only recently are learning, which is that to maximize efficiency, work should be done by enthusiastic, talented personnel in locations that are the among the least expensive and most productive, regardless of national borders.

Regarding the move to offshore legal outsourcing, David B. Wilkins, director of Harvard Law School’s program on the legal profession, recently told The New York Times as follows: “This is not a blip, this is a big historical movement. There is an increasing pressure by clients to reduce costs and increase efficiency.” According to the Times report, "with companies already familiar with outsourcing tasks like information technology work to India, legal services is a natural next step."

Many law firms are less than happy with the changing situation. ABA Journal columnist Patrick Lamb points out that "reaction against moving the profession into line with the business world reflects a persistent 'law firms are different' mentality which is, as [Kirkland & Ellis] former managing partner Fred Bartlit has said, “reminiscent of what the owners of the best buggy whip makers were saying when General Motors was first founded."

Indeed, if law firms can't adapt to a client-centric world and start living up to the values and practices of the companies they represent, they will be toast. Which is fine with some of the leading LPO providers, who are happy to eat them for breakfast, if it comes down to that.

But it will not come down to that. Forward-thinking law firms are embracing the change, and reaping rewards from it. Some of those law firms already are receiving more assignments and client revenue, not less. This is coming in part from (a) existing clients who send them “elective” legal work that otherwise would never have been performed, due to cost, but which is affordable when Western lawyers are paid to supervise and edit the work of attorneys offshore, and (b) new clients who hire those firms because of their reputation for developing a "value" alternative to the old model.

For example, partners from three large US/UK law firms (including Latham & Watkins and Morrison & Foerster), and inside counsel at one large bank, recently quit their jobs to form a boutique law firm, radiant.law, that bills for value, rather than by the hour, and that embraces offshore legal outsourcing, rather than resists it. One of the radiant.law founders, former Latham & Watkins partner Alex Hamilton, explains: "We had all been working at large law firms or in-house at large companies and felt that there was a lack of movement towards change and development in law firms that we were all looking for, so we decided to set up our own firm with a view to offering services to clients that are better value... using a support network including offshore legal providers."

In the new decade, smart law firms will continue to form new models, adapt to change, embrace legal off-shoring, and learn how to make all of this serve not only the interests of their clients, but their own. And as for the clients, they will expand their use of offshore legal outsourcing providers, whether in conjunction with law firms or directly.

2. Change is Happening in the East as Much as in the West

Much has been written about the dramatic upheaval in the US and UK legal worlds. But just as rapidly as the Western legal market is changing, so too is the legal world in India. National law schools are proliferating, skill sets are improving, business-oriented metrics are beginning to prevail, and India's "demographic dividend" is in full effect.

15 years ago, if an average middle-class Indian son told his parents he wanted to become a lawyer, this would have been about as welcome as an announcement that he's leaving town to join a circus. The sclerotic Indian legal system, in which court cases can take as long as a quarter of a century to be resolved, rivals the slowness of the Dickensian litigation in Bleak House. And it has not been uncommon for Indian "advocates" to earn as little as the rupee equivalent of $100 per month, or less, as their starting salary, if they receive any salary at all. In the pecking order of prestige and pay in India, much of the legal profession historically has been located somewhere around the rank of policemen, plumbers, and corrupt politicians. Fields like information technology, engineering and medicine for a long time had a near monopoly in attracting the best and brightest.

Not so today. With the rise of India as an economic powerhouse, accompanied by the rise of Indian corporate law firms, and with a well-publicized boom in legal process outsourcing, young people in India, and perhaps more importantly their parents (who still call the shots in traditional Indian families), have come to see law as an excellent career choice.

This increase in the prestige in being a lawyer, combined with the sheer size and youth of India's population (1.2 billion people, 65% of them young) has profound implications for the entire legal world. As former government official Pavan K. Varma writes in his excellent book, "Being Indian," although the caste system that began several thousand years ago is now "officially frowned upon," still in India "the mentality of a stratified society is very much in evidence in everyday life," and there is still a ubiquitous "obsession with status." That's why the number of elite, or "national," law schools in India has increased from one to 14, to meet the new demand for upscale legal careers. That's why the Indian educational system now is turning out record numbers of outstanding, English-speaking law graduates. By contrast, as The New York Times reports, law school in the U.S. increasingly is being seen as "a losing game," as "the glut of diplomas, the dearth of jobs and [the law schools'] candy-coated employment statistics have now yielded a crop of furious young lawyers who say they mortgaged their future under false pretenses."

Back in India, the benefits of the upsurge in talent among the legal labor pool will not be fully realized by LPO providers who focus primarily on document coding. The on-campus perception of those companies, at least among the best law students, is that they are unsavory "document factories." For that reason, the main beneficiaries of India's demographic shift toward the legal profession, apart from Indian corporate law firms, will be those providers who place their emphasis on intellectually challenging, higher value work such as legal research, and legal drafting of everything from contracts, memoranda, and litigation papers.

3. The New Tort Reform

Now that high-profile U.S. law suits have been defeated with the use of high-end, offshore legal outsourcing, the corporate world is just beginning to realize that the best response to bogus claims is not a costly settlement payout, but instead, a cost-effective defense.

In a comprehensive law review article on offshore legal process outsourcing, Professor Cassandra Burke Robertson of Case Western Reserve University School of Law has highlighted how offshore assistance in the resolution of frivolous lawsuits in particular is revolutionizing the way in which law is practiced in the West. "International legal outsourcing is reshaping the practice of law," says Professor Robertson, in her 59-page report, "A Collaborative Model of Offshore Legal Outsourcing." Professor Robertson uses an actual high-profile litigation in Los Angeles to demonstrate some of the most surprising and profound ways in which LPO services are shifting the legal landscape:

Offshoring the defense in that case did not merely replace domestic legal services with a lower-cost alternative elsewhere; instead, it changed the nature of the defense entirely. It took a case that would likely have been handled outside the court system through a nuisance settlement and brought it within the formal adjudicatory system. As a result, the case was decided on the merits and the decision is publicly available, potentially discouraging further meritless claims.

* * *

[I]nternational outsourcing can transform individual lawsuits, [and] it also demonstrates how outsourcing is quickly becoming a part of mainstream legal practice. Clients who experiment with outsourcing tend to continue their contracts and institutionalize the practice.

* * *

Given the rapid growth of transnational legal outsourcing—and the large cost-savings associated with that growth—it seems safe to say that outsourcing is not going away anytime soon. The legal profession will have to adapt to incorporate this new way of providing legal services.

In short, the offshore outsourcing of legal work is leading to an unprecedented new breed of effective tort reform, as defendants facing bogus or inflated claims are choosing to litigate and win. As Professor Robertson points out, this in turn discourages such claims. And the money that otherwise would be spent by defendants on nuisance payouts can be plowed by corporations right back into Western economies.

The implications are enormous. The average large corporation spends $19.4 million per year on outside counsel fees, much of it for litigation, and that is not including the huge amount of money wasted on nuisance payouts to plaintiffs and their lawyers.

In a brilliant review of the hit film, The Social Network, Harvard Law Professor Lawrence Lessig takes the example of the $65 million settlement extorted from Facebook founder Mark Zuckerberg by the Winklevoss twins (a deal the twins now say is not rich enough, so they are trying to void it in the courts) to point out that "the real villain" in the Facebook story is a legal system that taxes innovation and rewards frivolous litigation plaintiffs:

[A]ny legal system that would allow these kids to extort $65 million from the most successful business this century should be ashamed of itself. Did Zuckerberg breach his contract? Maybe, for which the damages are more like $650, not $65 million. Did he steal a trade secret? Absolutely not. Did he steal any other “property”? Absolutely not—the code for Facebook was his, and the “idea” of a social network is not a patent. It wasn’t justice that gave the twins $65 million; it was the fear of a random and inefficient system of law. That system is a tax on innovation and creativity. That tax is the real villain here, not the innovator it burdened.

In the coming decade, corporate and other defendants are increasingly likely to turn the tables on meritless lawsuits and realize tremendous costs savings, through offshore legal outsourcing.

4. Capital Funding of Litigation

The new development of third-party funding of plaintiffs' litigations, to the tune of hundreds of millions of dollars provided by seemingly unlikely investors such as Citigroup, means that corporations are under even more pressure to reduce their legal costs. Offshore legal outsourcing is an answer, not only to them, but also to the claims investors, who want to maximize their returns on worthwhile cases, rather than see most of their money go to legal fees.

Regarding third-party involvement in litigation funding, The New York Timesreports as follows: “Total investments in lawsuits at any given time now exceed $1 billion, several industry participants estimated. Although no figures are available on the number of lawsuits supported by lenders, public records from one state, New York, show that over the last decade, more than 250 law firms borrowed on pending cases, often repeatedly."

This new trend "sends shivers down the spines of general counsels all across the globe,” says Lisa A. Rickard of the Institute for Legal Reform, an arm of the United States Chamber of Commerce. It's a development that could not have come at a worse time for corporate legal departments, which already have been told to reduce their spending on outside counsel. For those cases that cannot or should not be settled, one solution increasingly will be the use of litigation support services from offshore providers. Legal outsourcing attorneys in India already have proven they can perform the vast majority of the work involved in litigation, including virtually anything other than appearing in court, signing court papers, and offering legal advice. And apart from dramatically reducing costs, the Indian providers have demonstrated that they can help defendants actually win.

For the new investors in litigation, because every dollar in legal fees means a reduction in the return on their investment, they too may come to see offshore legal outsourcing as a crucial value proposition.

Given that the total amount of third-party investment in litigation already exceeds the total annual revenue of legal process outsourcing companies worldwide, this new funding trend is likely to provide yet another boost to offshore providers in the new decade.

5. The Billable Hour Bites the Dust

Value-based, flat-fee or fixed-fee billing already is beginning to turn the legal world upside down. Instead of trying to maximize hours and costs, law firms that practice alternative billing, voluntarily or otherwise, are now trying to minimize those same hours and costs. Under that scenario, offshore legal outsourcing is not a dangerous threat to law firms, but instead a great opportunity.

Although billing by the hour is by no means dead, it seems to be an endangered species. The American Lawyer magazine reports that 91% of law firms agreed to flat fee billing for at least some entire matters in 2010.

Susan Hackett, Senior Vice President and General Counsel of the ACC, says, in a joint news advisory: "[V]alue-based billing options are becoming institutionalized, and will likely increase steadily year over year. We were interested to see if in-house counsel would continue to experiment with - or continue to deploy - new fee structures once the markets began to rebound and budgets were not under the same level of stress in 2010. The fact that billing practices did not revert back to the ‘way we used to do it’ demonstrates that in-house counsel are not retreating, but instead continuing the march to drive costs and value away from measuring the value of hours alone.”

For example, Morgan Lewis & Bockius reports that 40 percent of its revenues are billed through alternative fee arrangements. That firm handles Cisco's commercial litigation nationwide for an annual flat fee, and it has been entering into similar agreements with other clients.

Another mega-firm, O’Melveny & Myers, distributed an eventually leaked internal memo saying that by 2012, the firm will "adopt a single rate card" and become "the leader in providing high-end legal services on a fixed-fee basis." The memo noted that “[d]ocument review and production have been outsourced altogether or client-directed to contract attorneys.” The firm goes on state that “litigation clients are looking for rate and fee reductions, and we expect that mindset will continue into the next good economy and beyond.” As for transactional departments, according to the memo, they "will not be able to deploy and charge for large numbers of associates in the deals that will be done when the economy rebounds.” Lastly the firm says it will “will seek out opportunities to take on high-value litigation and transactions engagements at fixed fees.”

When law firms are paid a flat or fixed fee for a transactional or litigation matter, regardless of the number of hours required to complete the assignment, all of a sudden there is a tremendous incentive to outsource as much of the work as possible to low-cost, high-quality locations. By the year 2020, offshore legal outsourcing providers may be performing a substantial portion of these services, including not only document review, but also legal research and drafting.

6. Unintended Effects of Regulatory Reform

The financial regulations that arose from the lack of transparency and oversight blamed for the recent recession that shook the core of the Western economy, together with the regulations contained in the new U.S. healthcare legislation, have created vast new compliance obligations for U.S. corporations, all of which cry out for cost-effective, offshore legal solutions.

For example, private equity advisers and hedge funds now have to register their firms with the U.S. Securities and Exchange Commission and reveal their books to regulators. Also, institutions accepting deposits will be required to comply with the bank holding regulations issued by the Federal Reserve Bank. Similarly, companies that issue mortgages are subject to new record-keeping requirements to discourage improper loans. The new Consumer Financial Protection Agency will require entities that create consumer debt to disclose more information. Energy and healthcare reforms also will impose new compliance requirements.

Corporate legal departments, already under pressure to reduce spending, are likely to turn to offshore legal process outsourcing throughout this new decade, in order to get the new regulatory compliance work done as efficiently as possible.

7. "Legal Trauma Units" Level the Playing Field

As the ABA Ethics Commission astutely recognized, offshore legal outsourcing can be a blessing to overworked and out-gunned solo practitioners and small law firms. LPO providers are acting as "legal trauma units" for such lawyers, expertly handling their deadline emergencies, leveling the playing field for them, magnifying their strength, and allowing them to not only meet difficult deadlines, but even run circles around the client-required, "lean staffing" of large law firms.

In other words, hidden behind the huge, headline-grabbing LPO events, such as mining giant Rio Tinto's retention of CPA Global, or the Thomson Reuters acquisition of Pangea3, is the following significant development: Solo practitioners and small law firms, who comprise the majority of lawyers in the West, have been turning to offshore legal outsourcing in droves. Smaller legal outsourcing providers in particular have been deluged with requests from such lawyers, while the largest LPO companies focus on large corporations and mega-law firms.

This development dovetails with the conclusions in the American Bar Association's Formal Ethics Opinion 08-451, in which the ABA Ethics Committee found that legal outsourcing is "a salutary trend in a global economy" -- a practice that "can reduce client costs and enable small firms to provide labor intensive services" that they otherwise might not be able to manage.

After that Opinion was announced, the ABA Commission on Ethics 20/20 solicited feedback and held extensive hearings in which clients, lawyers, and LPO providers testified. Following those hearings, in a Report and Discussion Draft announced last November, the Commission issued what amounts to a ringing endorsement of legal outsourcing, while making sure to say that it is not an endorsement. ("The changes... recommended herein constitute neither endorsement nor rejection of the practice of outsourcing by lawyers and law firms.") Regarding the cost benefits of outsourcing in particular, the Commission said the following:

This cost differential may be of particular benefit to solo practitioners and small and medium-sized U.S. law firms, allowing them to compete more aggressively for large matters without fear that if they secure employment by the client they may lack adequate resources to perform the legal work.

No wonder the LPO industry will continue to boom in the coming decade, and not just because of corporate clients and slowly awakening large law firms.

8. Offshore Beats Nearshore

While some companies reportedly are thrilled to pay $100-200 per hour for "nearshore" or onshore U.S. contract attorneys, and although this trend may thrive for some time in contrast to the $300-500 per hour that BigLaw firms charge for similar work, the nearshore/onshore providers will continue to have serious competitive trouble in the face of the reality that very high-quality, more reliable alternatives are available offshore for $20-40 per hour, or better yet, for inexpensive flat fees.

In an article in The Los Angeles Times earlier this month ("Growth of Legal Outsourcing May Herald Era of Cheaper Lawyering"), the Times reports that "companies such as Goldman Sachs and Accenture have been receptive" to using outsourced legal services at nearshore provider Axiom Global, Inc. "because Axiom lawyers charge about $200 an hour, about half the average rate of associates at the largest firms outside New York."

In a similar vein, The Economist reports as follows: "DLA Piper, a big American law firm, plans to set up its own outsourcing operation next year. Taking advantage of the tough legal jobs market, the firm will build a network of thousands of non-staff lawyers, says Peter Pantaleo, the managing partner of the New York office. These lawyers will be American but cheaper, perhaps because they are looking for a work-family balance. They will do for perhaps $100 an hour work that might otherwise cost the client $500, says Mr Pantaleo."

U.S. freelance attorneys, who don't have the overhead of companies like Axiom or firms like DLA Piper, are charging much less. Last month's Business Today magazine reports that the average hourly rate charged by U.S. freelance attorneys is $50-100, but that this is contrasted with an average of $25-40 for Indian legal outsourcing attorneys.

Some harsh economic facts, in addition to India's demographic advantage discussed in reason number two above, suggest that the cost differential between onshore and offshore providers will continue to point clients offshore. Dean David Van Zandt of Northwestern University School of Law estimates that given student loan obligations, living expenses, etc., $65,000 per year is the break-even point that U.S. law graduates must earn just to stay afloat. The reporters at Above The Law say that "[a] break-even point of $65K seems low to us, given high law school tuition, the borrowing costs associated with student loans, and the opportunity cost of going to law school when you could be earning a salary in some other industry." They cite another academic expert at Vanderbilt for their conclusion that "the break-even point is much higher." But even if the "low" $65k figure were accurate, the fact remains that super-smart, ambitious, enthusiastic, Indian lawyers from even the finest law schools, and highly trained in U.S. legal research and legal drafting, are justifiably happy to work for one-fifth of that amount, considering the lower cost of living in India, among other factors.

And it's not just about professional labor arbitrage. India also offers serious advantages regarding non-salary operating costs. The cost of office space in Mysore, for example, where India's #1 ranked LPO is based, is still 1/43rd the cost of comparable space in Manhattan. Housing and other living expenses there remain so low that the Indian attorneys have a standard of living that would be the envy of many Manhattan associates, yet the Indians receive less than one-tenth the salary. It is very true that salaries and expenses in India are rising, but that's not too important. Also rising are the skill sets of the Indian attorneys.

Indeed, the issues of quality and reliability are paramount, and they often cut in favor of India. Many clients have chosen Indian lawyers over U.S. contract lawyers because, according to the clients, the contract lawyers they tried were (a) not consistently available to do the work, (b) required on-the-job training by the clients, and (c) delivered a work product that required major revisions. This is all in addition to the fact that the U.S. lawyers usually, but not always, charge higher fees.

A managing attorney at an Arizona business law firm recently turned to offshore legal outsourcing, precisely out of exasperation with his experience in trying to make use of U.S. contract attorneys. This is from one of his emails:

The first project I'm sending along is a Response to a Partial Motion to Dismiss. The Complaint was drafted by an ex-contract attorney, and filed while I was in trial. There are not many documents or issues involved, and the client received a Cause Determination from the EEOC, so the Complaint should have been a cake walk. Instead, the Complaint is a piece of crap.... I mention all of this in the hopes that you will understand how eager I am to find a source of consistent, high quality work that does not eat-up all of our profits (and then leave as soon as soon as an offer comes along that includes box seats at Suns games).

And here is part of another email this law firm client sent after switching to Indian LPO services instead:

I would be happy to give a testimonial providing a comparison to U.S. contract attorneys who seem incapable of turning in coherent work product, on time, and without doubling the number of hours it should have taken.

And below is what this managing attorney said to one of his firm's clients:

I've used dozens of contract and full-time attorneys here in the U.S., and thus far, [the India team] is doing a far superior job at drafting high level motions and pleadings for me in federal court.

LPO critics accurately point out that it is also easy to find examples of unsatisfactory legal services at companies in India. So nobody is saying Indian providers are always better, or even always less expensive. But because often Indian providers are better, or just as good, and because usually they are far less expensive, US and UK clients probably are going to continue to hire them in massive numbers in the coming years. And, for the reasons discussed below, this actually does not need to mean less work for Western lawyers.

9. The Death of the "They're Taking our Jobs" Myth

The mostly untapped market for affordable legal services (a phrase now widely seen as an oxymoron) is vast. At some point, it will become apparent to the legal and corporate worlds that when offshore legal outsourcing allows otherwise unaffordable court cases to be opposed or prosecuted, and deals to be done, most of which require Western lawyers to supervise and implement, the amount of work for Western lawyers will go up, not down.

Regarding the bitter and continuing complaint that legal jobs are lost in the U.S. because they are outsourced, law professor Cassandra Burke Robertson concludes otherwise, in her law review article mentioned above. She cites facts to support her point that offshore legal outsourcing "creates more jobs than it eliminates... [and] the cost savings achieved from offshoring lower-level work may create more high-end jobs onshore."

Even the offshoring of high-value work creates job opportunities in the West. Deals previously undone, and litigations previously settled (or never filed), due to previously excessive legal costs, become suddenly affordable. Affordability means more work for the Western lawyers involved in supervision, editing, negotiating, and/or appearing in court.

Are the projected 5000 new jobs in the LPO industry directly correlated to a 5000 job “shift” (read lost, redundant, right-sized, etc.) at top US law firms? Is it economically sound reasoning to assume that economic interactions are tit-for-tat? In short, no.

Does the increase of LPO mean that there may be marginally less demand for legal support staff for certain low-value service areas? Perhaps. Alternatively, doesn’t allowing firms to offer new services so clients can economically litigate and conduct transactions also increase the demand for the services of law firms, and thus the demand for lawyers? Absolutely.

On a macro level, despite the perennial, election-time slogans against outsourcing, financial experts and politicians know that in fact, offshore outsourcing leads to more Western jobs than it destroys. In an interesting Wall Street Journal article by William S. Cohen, former U.S. Secretary of Defense in the Clinton Administration, Cohen cites persuasive studies (especially one from Dartmouth's Tuck School of Business) demonstrating that "for every job outsourced to Bangalore, nearly two jobs are created in Buffalo and other American cities." Cohen also points out that the new U.S. jobs enabled by outsourcing are "higher-skilled and better-paying—filled by scientists, engineers, marketing professionals and others hired to meet the new demand created...."

In another article, this one by Kieth Pounds in The Times and Democrat, the author points out that the lower domestic prices caused by outsourcing also create more American jobs by creating more consumer demand, and he observes that the number of jobs being "insourced" to the U.S. by foreign companies is growing at a faster rate than the number of jobs outsourced abroad.

Another factor in favor of outsourcing is the resulting increase in foreign demand for Western products. As Indians and other foreign workers see a raise in their standard of living due to offshore outsourcing, and as they deepen their ties to the West, this translates into heavy demand for products imported from the US and the UK. That is one of the reasons why, according to the McKinsey Global Institute, for every $1 outsourced, the economic gain to the United States in particular is $1.12 to $1.14.

In short, as anti-outsourcing myths are exposed and start to fall away in the light of facts, this will remove yet another potential barrier to tremendous expansion of offshore legal outsourcing by the year 2020.

10. More Proliferation Than Consolidation

Some experts talk, perhaps wishfully at times, about the supposedly upcoming "consolidation" of the LPO industry. In fact, there has been much more proliferation than consolidation. With the one exception of the acquisition of LawScribe by UnitedLex, it seems that so far there has not been a single example of one LPO buying or merging with another. Of course, several legal process outsourcing providers have disappeared entirely (some leaving their old websites intact for posterity, like electronic tombstones), but for every company that has gone under, another three or so have cropped up. The industry has gone from 15 companies in 2005, to over 200 today, and that trend will only increase, as offshore legal outsourcing becomes more popular. This can be a very good thing, not just a bad thing, to the extent that boutique and other niche LPOs emerge to satisfy client needs that go beyond the currently dominant trend of high-volume document coding.

Global companies outsourcing their legal processes across the world seem to prefer doing business with smaller companies, the results of a new survey suggests. The survey conducted across 6,547 clients globally shows that smaller vendors, including legal outsourcing, LPO and legal KPO companies are satisfying more clients and to a greater degree compared to their larger counterparts.

Although feedback on the big names... has been generally positive, the companies that have excelled in delighting the customers have been smaller players....

So what makes these smaller players stand taller in the global market? "Smaller outsourcing providers... have been pushing their specialist knowledge and deep client understanding as their unique selling point for some time now, claiming that specialists provide a better service. While all outsourcers talk up their ability to specialise, this survey suggests that... smaller players are best positioned to deliver on that promise,'' said Eamonn Kennedy, who led the research for Datamonitor.

Actually, the "small is beautiful" trend has been accelerating, especially in the Western legal markets, where boutique or niche law firms are very much in fashion. Corporate and other clients are looking for less overhead, fewer conflicts of interest, more responsiveness, greater expertise, and last but not least, lower fees.

Ironically, however, in India the word, "strength," with reference to a service provider, usually means the number of employees, with a greater number signifying greater "strength." In the West, by contrast, a large number of employees is often perceived as weakness, not strength. "Strong" providers are those who provide more value for the money. As law industry expert Jordan Furlong said: "The overall marketplace for legal services is fracturing.... It's unbundling, and specialists are emerging. Legal work will go to the provider best designed for that particular work...."

Accordingly, at a time when Western clients are focusing on value and expertise, not size, it might be a mistake for LPO providers to try to mimic the same Western "BigLaw" model that is falling out of favor. The specialist capabilities of offshore legal outsourcing providers, beyond large-scale document coding, seem almost endless. They range, for example, from legal analysis for Hollywood film studios, to assisting in the criminal defense of the former CEO of the world's fifth largest accounting firm, to defeating libel lawsuits, to pursuing royalty claims for indigent music recording artists, to incorporation and other legal services for a steel company. A proliferation of LPO providers that expertly can handle an even greater variety of legal work will help propel the industry in the years ahead.

The document coding sector, however, including e-discovery, due diligence, and other high-volume document review services, may be a huge, gaping exception to the above generalization. Given the price competition in the document review field, with effective hourly rates sinking to what appears to be an average of less than $10 per hour, greater size and the concomitant economies of scale might not only be preferable -- they could become the only game in town.

A low barrier to entry has led to well over 100 document review companies in India, the Philippines, South Africa and elsewhere, resulting in the fierce price competition. In India, for example, there are hundreds of thousands of lawyers and non-lawyers, who, after two weeks of training, are able to do this kind of work for as little as a couple of hundred dollars a month or less. This is many times what the average Indian is paid. India's "demographic dividend," coming from the fact that the country has, and will continue to have, one of the largest and youngest populations on earth, means that (a) back office work in India will continue to explode, and (b) the price competition among document review providers will continue to reduce profit margins.

On top of that, the economies of scale and technological advances created by top-notch document review companies, such as CPA Global, UnitedLex, Clutch Group, Integreon, and Pangea3, mean that it is possible that only the very largest of providers, such as those five, will be able to make any significant profit from document coding, thanks to the sheer volume of their operations. Speaking of high volume, the 440-million-pound venture capital funding of CPA Global indicates that in some ways, at least a few of the leading offshore legal process outsourcing companies may come to resemble BPO (business process outsourcing) and IT companies, rather than law firms. Indian IT provider Infosys employs over 85,000 people, and it seems that CPA Global, which already has 1,300 personnel on its payroll, and which now has the investment to hire many more and engage in expanded marketing, is on that large-scale path. Similarly, Pangea3, recently acquired by Thomson Reuters for a rumored $100 million, is expanding its size rapidly.

Having said all that, the wave of the future for the most part is proliferation, not consolidation, especially since the vast majority of legal services involve drafting and research, not document review. A growing number of expert service offerings, and companies to provide them, will mark the new decade.

11. Western Lawyers Switch to Football

Instead of complaining about the supposed loss of jobs, forward-thinking Western lawyers are realizing that offshore legal outsourcing provides them with an opportunity, and maybe even a necessity, of moving up the value chain. Whether they are litigators or transactional lawyers, they have the opportunity to focus on becoming quarterbacks or team coaches, or as Jordan Furlong puts it, "solutions managers." That's what clients want from them the most. As for young associates, they will be trained to negotiate deals, appear in court, supervise offshore providers, and provide legal advice. None of those tasks can be done best (or in some cases, at all) by foreign lawyers. All of those roles provide an opportunity for growth, not decline, at least on the part of modern law firms that are willing to embrace the future, rather than resist it.

Law.com journalist Gina Passarella, in an article in The Legal Intelligencer ("Are Law Firms Morphing Into Managers of Legal Providers?") recently reported on this:

"Smart firms will say they still want to manage the process and sit at the client's right hand," [Jordan] Furlong said, adding however, that they need to realize there are some things the firm is good at and other things a legal process outsourcer may better handle. The real battleground for law firms in the near future will be over who will serve as the quarterback, or the solutions manager, Furlong said.

According to the article, several large law firms have been taking up the challenge. For example, Lovells, now Hogan Lovells, has sent over 9,000 matters to smaller firms to save its clients up to 20% on fees, while still maintaining oversight and supervision. "In turn, Lovells was able to increase its rates for the high-end work it was doing, given the fact that the clients were still saving money. That also made up for sending out some of the work...." The article concludes as follows:

"There used to be one monolithic legal services provider -- the law firm," Furlong said. "Now there are many and clients will choose among them." The "huge role" for law firms, he reiterated, is the quarterback.

Although many law firms are still not eager to publicize the practice, at least one national firm in Boston has been using an LPO for three years to do first drafts of briefs. When the Managing Partner of the office presents the idea to her corporate clients, they are very supportive.

This one small example speaks volumes about how the practice of Western law is likely to evolve in the next 10 years and beyond.

12. The Future May Belong to the "Just Crazy Enough"

In a now-famous New York Times article, business journalist David Segal reported on the surprising fact that many venture capital funds deliberately look for entrepreneurs who have a mental disorder. The investors are looking for potential business leaders who are "just manic enough" or "crazy enough." In the LPO field, about 6 years ago, Indian providers like Mindcrest, Lexadigm, Quislex, Pangea3 and others were "just crazy enough" to provide document review and other services that most Western companies and law firms would never imagine sending overseas. Now, the sending of document work to India is routine. Today, arguably "crazy" legal outsourcing entrepreneurs and other LPO leaders are setting their sights on the highest-value, highest-profit-margin mother lode, which is legal research and legal drafting. It is in those areas that offshore legal outsourcing is likely to make its greatest mark.

In the above-mentioned article, the New York Times reporter discusses the most sought-after kind of entrepreneur:

If you give him $750,000, he says, you can have a stake in what he believes will be a $1-billion-a-year company.

Interested? Before you answer, consider that the man displays many of the symptoms of a person having what psychologists call a hypomanic episode. According to the Diagnostic and Statistical Manual — the occupation’s bible of mental disorders — these symptoms include grandiosity, an elevated and expansive mood, racing thoughts and little need for sleep.

* * *

The attributes that make great entrepreneurs, the experts say, are common in certain manias, though in milder forms and harnessed in ways that are hugely productive. Instead of recklessness, the entrepreneur loves risk. Instead of delusions, the entrepreneur imagines a product that sounds so compelling that it inspires people to bet their careers, or a lot of money, on something that doesn’t exist and may never sell.

* * *

“You need to suspend disbelief to start a company, because so many people will tell you that what you’re doing can’t be done, and if it could be done, someone would have done it already,” says Paul Maeder, a general partner at Highland Capital. “There are six billion human beings on this planet, we’ve been around for hundreds of thousands of years, we’re a couple hundred years into the industrial revolution — and nobody has done what you want to do? It’s kind of crazy.”

So what's risky or arguably "crazy" about "high-end" legal outsourcing?

For starters, most Western corporate clients and law firms only recently have been learning about the usefulness of sending legal work overseas, and many see India and other low-cost jurisdictions as suitable for "chore" work, but not "core" work. Just like a decade ago, when sending "chore" document review projects abroad was either unheard of, or seen as dangerous, today there is considerable resistance to sending legal research and drafting assignments to India, the Philippines, or other foreign jurisdictions. That's why document coding and other repetitive, routine processes are definitely the "low hanging fruit" for most of today's LPO providers.

Another reason why the path of least resistance leads to document work is that legal research and drafting requires extensive and ongoing training -- the kind of training that law schools and law firms, in both the West and the East, traditionally do not provide. In order for Indian and other foreign professionals to learn to perform such "high-end" work for Western clients, experienced Western legal practitioners usually are needed to share their expertise, through intensive training sessions.

A third obstacle that leads many LPO companies to focus instead on "low-end" work is the fact that recruitment of talent to perform higher value assignments is much more difficult, and expensive. In the case of one particular legal research and drafting provider, only one out of every 900 job applicants has been able to score well enough on an aptitude test to be considered eligible for hiring. Also, competition in recruiting the best Indian law graduates, for the most part, comes not from the LPO industry, but from elite Indian law firms and companies, multinationals, and even "magic circle" London law firms. So starting salaries must be relatively high, compared those of most LPO providers.

Nevertheless, several offshore legal outsourcing companies, large and small, are undeterred. They are attracted by the prospect of higher profit margins, the ability to attract top-notch law graduates who want to be involved in international work, the availability of Western lawyers willing to do the training, and the fact that most Western legal services fall within the "high-end" category, making the addressable market worth well over $100 billion.

In an article, "Innovators at the Barricades," published by the Adam Smith, Esq. blog, law industry expert Bruce MacEwen argues that the not-so-secret strategy of even some of the largest LPO providers is to advance from down-market upstarts to up-market leaders, by moving up the value chain and "taking law firms out of the equation altogether":

Outsourcing is here to stay. Whatever you call it, and whatever you think of its quality, clients have tasted of the fruit of the forbidden tree and they're not going back.

* * *

A particularly interesting firm, which has ambitions you may deem admirable or frightening or a combination thereof, is CPA Global, which bills itself as the world's leader in legal process outsourcing, and which raised a mere $700-million in a private placement in the UK this past spring. For that nice sum, the investors got what? 49%. Not even control. This is a war chest on a scale the AmLaw 10 and the Magic Circle, put together, would be very hard-pressed to match. And they'd probably have to cede control.

* * *

The ambitions, and business strategy, of CPA Global and their ilk are no secret: Bypassing law firms altogether and marketing their offerings directly to clients. If another word for outsourcing is disintermediation, welcome to the ultimate disintermediation: They would like to take the law firm out of the equation altogether.

* * *

And this [offering of not only document review but also higher value work, all at "Bangalore" rates] is precisely where the independent outsourcing firms can have an impact. Once clients begin to get accustomed to the notion of being able to unbundle, or unchunk, legal engagements - be they disputed matters or transactional ones - there's potentially little end to it.

In a more comprehensive article, Jordan Furlong points out that off-shore providers are "moving up the value chain," far beyond "first-year associates’ grunt work," to the point where they are "rewriting the rules of the game":

LPOs, it has to be emphasized, are not just doing first-year associates’ grunt work, not anymore. They are moving up the value chain steadily and with surprising speed, taking on the work of second-, third- and fourth-year lawyers -- not just by using lower-cost labor, but by doing the work more systematically and efficiently. As I said a while back, these companies will not be content with basic work forever; they see no reason why they can’t eventually do the toughest legal jobs. Billion-dollar legal services providers, unfettered by traditional lawyer restrictions, can go global instantly and almost effortlessly. They’ll have more than enough money to acquire the top talent from the best firms worldwide, to invest in new systems and innovations that will reduce costs even more, and most importantly, to change clients’ expectations about what a law firm can deliver. They will be law firms, in effect, and even if lawyers in a given jurisdiction somehow succeed in keeping them out, the landscape will have changed: clients will demand their lawyers compete on the same playing field."

Professor Robertson makes a similar point in her law review article, cited above. She shows how offshore legal outsourcing is not only confined to quasi-legal work such as filling out forms, coding documents, and transcribing depositions, but also includes complex work such as legal research, drafting contracts, drafting briefs, and preparing patent applications. Robertson points out that, “while this higher-level legal work represents only fifteen percent of the LPO market right now, it is quickly growing; as LPO firms become more established, they tend to take on increasingly more sophisticated work.”

Twenty years ago, Indian software giant Infosys had only one client, and its founders struggled in poverty. At that time, Western IT industry experts probably thought it was impossible that a relatively poor country such as India would become a huge center for software development. Only ten years ago, who could have predicted that Indian lawyers by the thousands would be performing document review for U.S. law firms and their clients? Looking back, those apparently impossible occurrences, now that they have happened, somehow seem inevitable. In this new decade, the same will be true for the outsourcing of sophisticated, higher value legal work that Indian and other foreign companies can provide, and already are providing, at a high level of quality and speed, and at dramatically lower cost.

January 13, 2011

In an article today, The Law Gazette calls attention to a just-released report that suggests that for modern law firms, "creating links" with legal process outsourcing (LPO) companies is "essential to dampen the effects of unpredictable markets." The report, "New Frontiers: Law Firms in 2020," has been issued by London-based Jomati Consulants, an affiliate of Altman Weil Global set up by former Clifford Chance Managing Partner Tony Williams. Here are a few excerpts from the article:

Top commercial law firms must become more flexible and less reactive to cope with the boom-bust pattern of global markets over the next 10 years, a report by consultants Jomati has suggested.

Introducing variable rather than fixed costs, creating links with legal process outsourcers (LPOs), and setting up internal LPO-style businesses will be essential to dampen the effects of unpredictable markets, according to the report, New Frontiers: Law Firms in 2020.

The report said: ‘As the building up of global capability grows over the next 10 years, and the investment in people, IT, office space and support staff grows for transactional teams, so will the risk of a dangerous cost over-shoot. A bust for a one-office firm is bad enough; a bust for a firm with corporate associates in 20 offices is going to hurt significantly more.’

Meanwhile, competition from Chinese law firms, which are already hiring senior lawyers from major UK and US firms and are becoming increasingly skilled, could lead to fee competition across Asia, the report predicted.

Jomati principal Tony Williams, a former managing partner at magic circle firm Clifford Chance, said: "We often talk about global law firms as if they are finished products. The truth is, the development of global law firms is just beginning."

In what may be the most comprehensive article written thus far on the increasingly hot-button topic of offshore legal process outsourcing (LPO), Associate Law Professor Cassandra Burke Robertson concludes that the LPO trend is revolutionizing the way in which law is practiced in the West.

In her 59-page law review research article “A Collaborative Model of Offshore Legal Outsourcing,” Robertson writes, “International outsourcing is quickly reshaping the practice of law. Sending legal services offshore does not merely shift existing legal practice to a lower-cost provider. Instead, it can change the nature of the services rendered, moving cases from settlement to adjudication on the merits and making additional legal services affordable.”

Backing up this claim, she analyzes the example of high-profile Hollywood litigation involving defendant Sacha Baron Cohen of "Borat" fame. Robertson articulates some of the most surprising ways in which LPO services are shifting the legal landscape. "Offshoring.... changed the nature of the defense entirely. It took a case that would likely have been handled outside the court system through a nuisance settlement and brought it within the formal adjudicatory system. As a result, the case was decided on the merits, and the decision is publicly available, potentially discouraging further meritless claims," says Robertson.

Robertson’s views reflect a growing acceptance of the LPO industry among the Western legal community. She also shows how offshore legal outsourcing is not only confined to quasi-legal work such as filling out forms, coding documents, and transcribing depositions, but also includes complex work such as legal research, drafting briefs, drafting contracts, and preparing patent applications. Robertson points out that, “while this higher-level legal work represents only fifteen percent of the LPO market right now, it is quickly growing; as LPO firms become more established, they tend to take on increasingly more sophisticated work.”

Robertson also stakes out a position different from several recent legal commentators, by cautioning against the increasingly prevalent trend of "disaggregation," i.e., where "discrete tasks [are] carved out of the overall legal representation" and outsourced. She argues that this can lead to diffusion of responsibility among the various service providers, a problem that is magnified when work is sent outside the country. Robertson suggests that the risks can be minimized by a collaborative approach between the service provider and its client, where the focus is on "cooperation, communication and negotiation of status and resources."

Case Western Reserve University is one of the country’s leading private research institutions. Located in Cleveland, we offer a unique combination of forward-thinking educational opportunities in an inspiring cultural setting. Our leading-edge faculty engages in teaching and research in a collaborative, hands-on environment. Our nationally recognized programs include arts and sciences, dental medicine, engineering, law, management, medicine, nursing and social work. About 4,200 undergraduate and 5,600 graduate students comprise our student body. Visit case.edu to see how Case Western Reserve thinks beyond the possible.

January 04, 2011

Today's LegalWeek.Com brings legal outsourcing news that tends to further validate our contention that (a) the long overdue move from hourly billing to flat fees (value billing) will result in a dramatic increase in offshore legal process outsourcing, and (b) Western lawyers have no reason to fight LPO, and every reason to embrace it. In particular, the news is that partners from three large US/UK law firms, and inside counsel at one large bank, have quit their jobs to form a boutique law firm that will bill for value, rather than by the hour, and that will embrace offshore legal outsourcing, rather than resist it:

A group of partners from Barlow Lyde & Gilbert, Latham & Watkins and Morrison & Foerster have come together to launch a technology, outsourcing and commercial law boutique.

The new firm launched today as radiant.law [actually radiantlaw.com], with Skinner and Hamilton serving as directors....

Radiant.law does not intend to hire any junior lawyers and will not charge clients an hourly rate. Instead, it will aim to agree fixed prices for work in advance....

The new outfit will work with legal outsourcer Pangea3 on certain transactions; however, the boutique will be responsible for managing the deal as a whole.

Former Latham & Watkins partner Alex Hamilton did not mince words in explaining that the "lack of movement toward change and development in law firms" was the impetus for the setting up of the new firm:

Hamilton said: "We have all been working at large law firms or in-house at large companies and have felt that there has been a lack of movement towards change and development in law firms that we were all looking for, so we decided to set up our own firm with a view to offering services to clients that are better value and provide ongoing support using a support network including offshore legal providers. We will be looking to grow over the coming months and years."

December 27, 2010

Today's Chicago Tribune features an article on how legal process outsourcing (LPO) is helping to reshape the legal world, as "alternatives to the traditional law firm are becoming increasingly attractive to buyers of sophisticated legal services in the post-financial-meltdown era." In the article, Indiana University Law Professor William Henderson, a specialist in legal workforce markets, is quoted as follows, regarding the offshore legal outsourcing trend in particular: "This is the beginning of a wave that's only going to get bigger in the years to come."

As evidence of how legal outsourcing of different kinds is shifting the legal landscape, the Tribune cites two important and recent mergers in the legal industry:

Two recent mergers in the legal industry speak volumes about the forces reshaping the business of law at its highest levels. What's also notable is that neither deal involved large law firms.

Thomson Reuters, a media and information-services company, acquired Pangea3, a legal-process outsourcing firm with most of its lawyers in India, in November. A month earlier, Axiom Global Inc., which provides lawyers-for-hire to big corporations, bought another legal staffing company, Chicago-based LawyerLink LLC.

The deals are not large; Axiom and LawyerLink didn't even bother issuing press releases. Yet the transactions reflect how alternatives to the traditional law firm are becoming increasingly attractive to buyers of sophisticated legal services in the post-financial-meltdown era.

The heads of corporate legal departments like the competition because it drives down their costs as their bosses continue to pressure them to cut spending. And the biggest expense is money spent on outside legal counsel. The nation's 100 largest law firms had combined revenue of $64.8 billion in 2009, according to American Lawyer magazine.

As 2010 comes to a close, experts predict little to no growth in total revenue from a year ago for the largest law firms, also known as Big Law. Despite the lack of growth, lawyers breathed a sigh of relief. Few industries suffered more from the financial meltdown than Big Law, as firms significantly downsized in 2009.

Work force restructuring continued in 2010 despite an improving economy, though not as many lawyers appear to have been laid off this year compared with 2009, when firms of all sizes shed more than 4,600.

New regulations in health care and financial services will keep legions of lawyers busy next year. But busy will not necessarily mean greater law firm revenues because of unrelenting pressure from clients to do more with less.

"Sophisticated general counsels are trying to stretch their legal budgets," said William Henderson, a law professor at Indiana University, who specializes in legal labor markets. "That's what is leading to the shakeout."

LawyerLink, Pangea3 and other alternatives to law firms have been around for several years, but their business models have gained momentum since the recession because they have found ways to cut costs out of basic legal tasks.

Interestingly, the Tribune reports that "companies such as Goldman Sachs and Accenture have been receptive" to using outsourced legal services at Axiom "because Axiom lawyers charge about $200 an hour, about half the average rate of associates at the largest firms outside New York." By contrast, "lawyers in India charge $25 to $35 an hour for routine corporate work such as drafting contracts and complying with regulations." The article addresses the misperception that legal outsourcing to India and elsewhere inevitably means a compromise in the quality of the work, noting that the Thomson Reuters acquisition of India-based legal process outsourcing company Pangea3 "appears to at least validate the business model":

There is still the widely held belief among law firm partners and general counsels that outsourcers don't offer the same quality of work as law firms, Henderson said. The perception, right or wrong, has prevented outsourcing from becoming embraced in the legal industry. Only about 1 percent of the money spent on lawyers in the United States goes to outsourcers, according to various estimates.

But Thomson Reuters' acquisition of Pangea3, based in New York and Mumbai, appears to at least validate the business model....

In announcing the deal, Thomson Reuters, which owns West, a legal publisher, said outsourcing will be key to helping law firms and their clients be more "responsive and cost-effective."

Henderson agrees: "This is the beginning of a wave that's only going to get bigger in the years to come."

December 07, 2010

We know from experience that countless U.S. law firms and solo attorneys continue to benefit from legal outsourcing to India. This has confirmed the wisdom of the American Bar Association's Formal Ethics Opinion 08-451, in which the ABA Ethics Committee found that legal outsourcing is "a salutary trend in a global economy" -- a practice that "can reduce client costs and enable small firms to provide labor intensive services" that they otherwise might not be able to manage. No wonder the LPO industry is booming, and not just because of corporate clients.

But in a blog post last May, we noted that many freelance contract attorneys in the U.S. have taken issue with this. In particular, freelance lawyer Lisa Solomon, a respected blogger with Research and Legal Writing Pro, pointed in part to a couple of Indian legal outsourcing providers that apparently are guilty of atrocious spelling, grammatical, and more serious errors. Now Lisa, we would like to return the favor!

The managing attorney at a successful Arizona business law firm recently turned to offshore legal offshoring, precisely out of exasperation with his experience in trying to make use of U.S. freelance contract attorneys. This is from one of his emails:

The first project I'm sending along is a Response to a Partial Motion to Dismiss. The Complaint was drafted by an ex-contract attorney, and filed while I was in trial. There are not many documents or issues involved, and the client received a Cause Determination from the EEOC, so the Complaint should have been a cake walk. Instead, the Complaint is a piece of crap. Of course, I allowed it to be filed, and therefore have only myself to blame. I mention all of this in the hopes that you will understand how eager I am to find a source of consistent, high quality work that does not eat-up all of our profits (and then leave as soon as soon as an offer comes along that includes box seats at Suns games).

And here is part of another email this law firm client sent after switching to Indian LPO services instead:

I would be happy to give a testimonial providing a comparison to U.S. contract attorneys who seem incapable of turning in coherent work product, on time, and without doubling the number of hours it should have taken. And don't get me started on full-time salaried associates.

And below is what this managing attorney said to one of his firm's clients:

The company I told you about is SDD Global Solutions. I've used dozens of contract and full-time attorneys here in the U.S., and thus far, SDD Global is doing a far superior job at drafting high level motions and pleadings for me in federal court.

But don't get us wrong. It would be an obvious mistake to conclude that all freelance contract attorneys in the U.S. are incompetent, or lacking in sufficient ambition to serve their clients. That would be just as silly as concluding that because there are some incompetent Indian LPO companies, the entire offshore legal outsourcing industry is therefore suspect.

Having said all that, some harsh economic facts seem to belie the suggestion that U.S. freelance contract attorneys are providing serious competition to offshore LPO providers. Dean David Van Zandt of Northwestern University School of Law estimates that given student loan obligations, living expenses, etc., $65,000 per year is the break-even point that U.S. law graduates must earn just to stay afloat. The mavens at Above The Law say that "[a] break-even point of $65K seems low to us, given high law school tuition, the borrowing costs associated with student loans, and the opportunity cost of going to law school when you could be earning a salary in some other industry." They point out that "[a]nother academic, Herwig Schlunk of Vanderbilt Law, believes that the break-even point is much higher." But even if Dean Van Zandt's "low" $65k figure is accurate, the fact remains that super-smart, ambitious, enthusiastic, Indian lawyers from even the finest law schools, and highly trained in U.S. legal research and legal drafting, are justifiably happy to work for one-fifth of that amount, considering the lower cost of living in India, among other factors.

Perhaps that's why this month's Business Today magazine, in yet another major media story on the growing LPO phenomenon, reports that the average hourly rate charged by U.S. freelance attorneys is $50-100, contrasted with an average of $25-40 for Indian legal outsourcing attorneys.

Given all of the above, it seems that what we said in last May's blog post could bear repeating:

Some clients of our law firm's Indian company have chosen our India team over U.S. contract lawyers because, according to the clients, the contract lawyers they tried were (a) not consistently available to do the work, (b) required training by the clients, (c) delivered a work product that required extensive revision, and (d) usually, but not always, charged higher fees. As the LPO critics have pointed out, it also is easy to find examples of unsatisfactory legal services companies in India, so we're certainly not saying Indian providers are always better, or even always less expensive. But when they are better, or just as qualified, and when they are less expensive, they are going to be hired.

For the sake of U.S. freelance attorneys, we hope their argument does not boil down to a plea to simply “Buy American,” even if the result is more expensive and not any higher in quality. Corporations, law firms, and solo attorneys are increasingly unwilling to do that, just as U.S. consumers are not going to stop shopping at WalMart (where most of the products are from China), or stop buying foreign-made clothes, etc. And if anyone wants to appeal to compassion for the human suffering caused by unemployment and poverty, then suggesting a boycott of the people of India may not be the most logical or effective means. A better strategy for U.S. contract lawyers to promote their services might be to find ways to compete with the Indian providers regarding all of the above-mentioned attributes that clients want.

December 04, 2010

In an influential article on the popular TechnoLawyer blog -- an article so influential that it already has led several law firms to hire at least one off-shore legal outsourcing company -- legal technology guru Seth G. Rowland pays many respects to LPO, while at the same time warning that it threatens the entire Western legal world as we know it. Rowland is here to praise legal process outsourcing, and also to bury it. Below is an excerpt from the TechnoLawyer synopsis:

How would you like a Tim Ferriss-style four hour work week? Impossible you say? Not with legal process outsourcing. Just send that multi-state research memo to India and your eDiscovery review to the Philippines. Why hire overpriced American associates when you can outsource to cheap, English-speaking lawyers overseas? Although tempting, legalprocess outsourcing has a dark side that threatens the American legal industry. In this TechnoFeature, document and workflow automation expert and technology consultant Seth Rowland identifies the major LPO players, explains what they offer, and then lays out an alternative strategy that American law firms can employ to reduce costs and compete globally while avoiding the fate of American manufacturing companies that outsourced themselves into extinction.

But before we cross over to the "dark side," here's some of the good stuff:

Every revolution has its tipping point. The tipping point for legal process outsourcing (LPO) may have occurred two weeks ago when Thomson Reuters acquired LPO powerhouse Pangea3....

Lawyers have finally begun to realize that our legal system is undergoing a transformation. Once a regional business managed by local and state bar associations, the practice of law has officially become internationalized. Thousands of lawyers in Mumbai as well as Australia, China, South Korea, New Zealand, Sri Lanka, Israel, and the Philippines are busy drafting legal briefs, abstracting leases, coding documents, summarizing depositions, and conducting due diligence. They are working under the supervision of American lawyers, for American law firms and corporations, on matters of American law.

This revolution is made possible by advancements in computer technology and telecommunications that allow a virtual world-wide presence for the practice of law. Documents, data, and images can be stored in the cloud, accessible securely to users around the world. Thanks to LexisNexis and Westlaw, anyone anywhere can conduct legal research. With the emergence of VoIP telephone service, Web conference services such as GoToMeeting and WebEx and Cisco's TelePresence, virtual teams can work together at practically no cost. Using a virtual PBX system like 8x8 with a "SoftPhone," you can dial extension 10 for Mumbai, and extension 11 for New York.

This revolution is also made possible by cultural advancements. The globalization of "English" as a universal language for the conduct of business has resulted in more people speaking English as a second language than speak it as a first language, according to Thomas Friedman in his book, "The World is Flat: A Brief History of the Twenty-First Century." Former British and American colonies like India, South Africa, New Zealand and the Philippines also share a "common law" legal system. With a median salary of $20,000 per year for an Indian lawyer [Rowland must be talking only about the largely irrelevant elite of the elites, because law is generally not considered a high-paying profession in India, and most Indian lawyers fresh out of law school earn from $120 per year -- that is no typo -- to $2,000 per year, and $12,000 is considered to be a decent annual paycheck even for newly-minted graduates of top law schools], the services of a highly trained lawyer can now be offered for a fraction of the cost of an inexperienced American paralegal. Moreover, the time difference (10 hours between New York and Mumbai), is such that assignments given at the close of business in New York, arrive early morning in Mumbai and often can be completed by the time the assigning lawyer in New York gets back to the office.

* * *

With the addition of American management techniques and American-trained attorneys into the LPO workflow, as well as special education programs in Indian Universities, the quality and consistency of these services has improved in recent years. The price is right, and the quality is good. LPO gives you a 24x7 flexible workforce that enables you to replace your "fixed staffing costs" with "discounted variable staffing."

So far, so good. So what's the problem? Without offering any evidence, Rowland assumes that this is all a zero-sum game, in which the success of offshore legal outsourcing must inevitably be a threat to Western law firms. At the same time, he offers more praise for LPOs, to the point of arguing that Western law firms need to learn from the offshore companies in order to survive:

Our legal system is being given a wake-up call. The pressure of the market is forcing the "profession" of law to recognize what Ed Poll calls "The Business of Law." Law firms are under pressure to act like businesses. That means cutting costs and making charges more predictable. The sky has not fallen yet. We still is time to save the American legal industry. The same business process modeling used by LPO firms when combined with the appropriate technology can transform our law firms into sleek efficient, productive, innovative and highly profitable companies that serve as a model for the world to follow.

Rowland goes on to suggest over a dozen undoubtedly excellent software applications that law firms can use to emulate LPO companies and supposedly "save the American legal industry." But in his valiant effort to "save" legal work that otherwise is going overseas, Rowland misses three crucial points:

1. Even supposing that Western law firms adopt the most advanced LPO technology, there still remains the pesky problem that actual human beings are needed to implement it. Dean David Van Zandt of Northwestern University School of Law estimates that given student loan obligations, living expenses, etc., $65,000 per year is the break-even point that U.S. law graduates must earn just to stay afloat. The mavens at Above The Law say that "[a] break-even point of $65K seems low to us, given high law school tuition, the borrowing costs associated with student loans, and the opportunity cost of going to law school when you could be earning a salary in some other industry." They point out that "[a]nother academic, Herwig Schlunk of Vanderbilt Law, believes that the break-even point is much higher." But let's assume that Dean Van Zandt's "low" $65k figure is accurate. Even so, all of the high-tech emulation in the world cannot allow law firms to escape the fact that super-smart, ambitious, enthusiastic Indian lawyers from even the finest law schools are justifiably happy to work for one-fifth of that amount, considering the lower cost of living in India, among other factors.

2. It's not just about salaries. It's also about the low cost of both operating and living. The cost of office space in Mysore, for example, where the #1 ranked LPO in India is based, is still 1/43rd the cost of comparable space in Manhattan. Housing and other living expenses there remain so low that the Indian attorneys have a standard of living that would be the envy of many Manhattan associates, yet the Indians receive less than one-tenth the salary. Rowland fails to take advantage of the argument that salaries and expenses in India are rising, but that's not so important. Also rising are the skill sets of the Indian attorneys.

3. The fact is that offshore legal outsourcing need not be a threat to American lawyers. Many law firms are embracing LPO, and reaping rewards from it. Those firms are receiving more assignments and more client revenue, not less. This is coming in part from (a) existing clients who send them “elective” legal work that otherwise would never be performed, due to cost, but which is not a problem when Western lawyers are paid to supervise and edit the work of attorneys in India, and (b) new clients who come to those law firms only because of their reputation for developing an alternative to the old model. Also, the statistics suggest it is likely that off-shore outsourcing leads to more jobs in the West, not fewer. Off-shore legal outsourcing, especially high-end legal outsourcing, creates more legal work in the West, as deals previously undone, and litigations previously settled (or never filed), due to excessive legal costs, are suddenly affordable. Affordability means more work for the Western lawyers involved in supervision, editing, negotiating, and/or appearing in court. Commentator Michael Bell makes a similar point in a post on his LPO Source blog:

Are the projected 5000 new jobs in the LPO industry directly correlated to a 5000 job “shift” (read lost, redundant, right-sized, etc.) at top US law firms? Is it economically sound reasoning to assume that economic interactions are tit-for-tat? In short, no.

Does the increase of LPO mean that there may be marginally less demand for legal support staff for certain low-value service areas? Perhaps. Alternatively, doesn’t allowing firms to offer new services so clients can economically litigate and conduct transactions also increase the demand for the services of law firms, and thus the demand for lawyers? Absolutely.

As discussed above, mastery of the new legal services technology, while important, is not the salvation of Western lawyers who mistakenly see themselves inevitably in a competition with LPOs. This is because offshore talent already is using the same technology even less expensively. This supposedly frightening news is really a signpost showing a brighter future ahead, assuming Western law firms are up to the challenge. If any law firm or solo practitioner wants to not only ride out this "perfect storm," but also profit from it, then it seems that the focus should not be on trying to prevent Indian lawyers from doing what they do best. Instead, the aim should be to leverage the Indian talent, while at the same time training and utilizing Western attorneys to supervise and edit the work of the India teams, negotiate deals, argue in court, and provide legal advice. Most of that cannot easily be done in India, and much of it cannot be done in India at all. So why not focus on those higher value skills, rather than trying to hold on to work that can more efficiently be done offshore?

December 02, 2010

That's the title of yet another major article on offshore legal outsourcing. This one is by T.V. Mahalingam and Rahul Sachitanand in the latest issue of Business Today, India's leading business magazine. The article includes a round-up of quotes from LPO companies UnitedLex, Cobra Legal Solutions, Pangea3, Mindcrest, and SDD Global Solutions, as well as the legal process outsourcing units of IT/BPO companies Infosys, Wipro, WNS, and Cognizant. The article also features facts and figures, such as these:

Number of English-speaking lawyers "churned out" each year in India: 80,000

Average hourly billing rates of Indian LPO attorneys: $25-40

Average hourly billing rates of U.S. law firm attorneys: $250-350

Average hourly billing rates of U.S. freelance contract attorneys: $50-100

Here are a few excerpts from the article:

Consider these numbers: "A document review in a New York law firm will cost $75-80 per hour; in Ohio, it would be $40-50; in India, we do the same for $11-12," says Sakthivel Venkatraman, Managing Director for India Operations at Cobra. It is hardly surprising then that 85% of all legal process outsourcing vendors, whether primarily or exclusively, deliver services in India, even though most of them are headquartered in the US.

* * *

And the size of the Indian industry? "A billion dollars," proclaimed Sanjay Kamlani, Co-CEO of Pangea3, at an industry conference held in Noida in November. It was a number that not everybody agreed with. "Perhaps $400 million is more like it, if we were to look at just pure-play LPO work done out of India. Perhaps if you included back-office work too, then it could be a billion dollars," says Ganesh Natarajan, President and CEO of Chicago-headquartered Mindcrest. Kamlani, though, says his estimate of a billion dollars includes the captives of American corporations like Honeywell and Citigroup, which do legal work out of India.

* * *

Sceptics might argue that the recent boom in the LPO industry is short-lived and can be attributed to the global recession. They argue that as bankruptcies and litigation went through the roof, Indian LPOs got a chunk of the huge legal work.... But industry folk like Natarajan and Kamlani believe a structural shift of sorts is happening and that business is at a possible inflection point in terms of growth.

"Earlier, LPOs were getting most of their business from the legal departments of companies that wanted to reduce costs," says Natarajan. "However, since the recession, we are seeing more law firms talking to LPOs," he adds. It is a point of view echoed by SDD Global's Russell Smith: "Law firms too, are increasing their involvement with LPOs, but mostly at the insistence of their corporate clients," he says.

Also, courtesy of the recession, American law firms are being asked by clients to bid for business on a fixed-fee basis, rather than on hourly bills. That has forced law firms to cut costs, and in turn, to engage LPOs.

* * *

Another sign of the maturity of the industry is the nature of the work that LPOs are undertaking and the increasing depth of the client relationships. Gurgaon-based UnitedLex began with patent support and contract management but has expanded to document review, trademarks support, and legal research.

UnitedLex CEO Daniel Reed says companies such as SDD Global and the one he heads are also trying to move the LPO industry beyond the lift-and-shift business model. "Clients are now approaching us to help them redesign their overall contracting function and provide technology and process design support," says Reed.

Click here to read the full article, which includes the added benefit of an amusing photo of yours truly, who arguably made a mistake by agreeing to stand on his head in the yoga posture shirshasana, succumbing to outright begging by the Business Today photographer.

December 01, 2010

In what may be the most comprehensive and thoughtful articles on the topic of offshore legal process outsourcing ("LPO") in the last few years, Associate Professor Cassandra Burke Robertson of Case Western Reserve University School of Law has concluded that this trend is revolutionizing the way in which law is practiced in the West. "International legal outsourcing is reshaping the practice of law," says Professor Robertson, in her increasingly acclaimed, 59-page law review article, "A Collaborative Model of Offshore Legal Outsourcing." Professor Robertson suggests that for legal outsourcing to be effective, buyers of LPO services should "adopt a collaborative model that builds relationships" to avoid potential risks. A copy of the article can be downloaded here.

Using a particular and actual high-profile litigation in Los Angeles to demonstrate some of the most surprising and profound ways in which LPO services are shifting the legal landscape, Professor Robertson comments as follows:

Offshoring the defense in that case did not merely replace domestic legal services with a lower-cost alternative elsewhere; instead, it changed the nature of the defense entirely. It took a case that would likely have been handled outside the court system through a nuisance settlement and brought it within the formal adjudicatory system. As a result, the case was decided on the merits and the decision is publicly available, potentially discouraging further merit-less claims.

* * *

[I]nternational outsourcing can transform individual lawsuits, [and] it also demonstrates how outsourcing is quickly becoming a part of mainstream legal practice. Clients who experiment with outsourcing tend to continue their contracts and institutionalize the practice.

* * *

Given the rapid growth of transnational legal outsourcing—and the large cost-savings associated with that growth—it seems safe to say that outsourcing is not going away anytime soon. The legal profession will have to adapt to incorporate this new way of providing legal services.

Professor Robertson's views reflect the growing acceptance of the LPO industry among the Western legal community. Barely a decade old, offshore legal outsourcing was scoffed at initially, grudgingly accepted thereafter, and is now fast being accepted as a phenomenon that is here to stay. As Professor Robertson rightly points out, legal outsourcing received a major boost after being approved by the American Bar Association and numerous state and local bar associations. Professor Robertson's article also validates the view that legal outsourcing from the West to countries like India is not just confined to quasi-legal work such as filling out forms and transcribing depositions, but includes high-end, complex work such as legal research, drafting briefs, drafting contracts, and preparing drafts of patent applications. She points out that “[w]hile this higher-level legal work represents only fifteen percent of the LPO marked right now, it is quickly growing; as LPO firms become more established, they tend to take on increasingly more sophisticated work.”

Importantly, regarding the highly contentious and bitter complaint that legal jobs are lost in the U.S. because they are outsourced, Professor Robertson concludes otherwise. She cites facts to support her point that offshore legal outsourcing "creates more jobs than it eliminates... [and] the cost savings achieved from offshoring lower-level work may create more high-end jobs onshore." Not only do I agree, but I would further add that even the offshoring of high-value work creates job opportunities in the West. I have seen in my own experience how this kind of outsourcing creates more legal work in the West, not less. Deals previously undone, and litigations previously settled (or never filed), due to previously excessive legal costs, become suddenly affordable. Affordability means more work for the Western lawyers involved in supervision, editing, negotiating, and/or appearing in court.

Professor Robertson also stakes out a position different from several recent legal commentators, by cautioning against the increasingly prevalent trend of "disaggregation," i.e., where "discrete tasks [are] carved out of the overall legal representation" and outsourced. She argues that this can lead to diffusion of responsibility among the various service providers, a problem that is magnified when work is sent outside the country. Professor Robertson acknowledges that while outsourcing part of a larger assignment per se amounts to its disaggregation, the risks can be minimized by a collaborative approach between the service provider and its client, where the focus is on "cooperation, communication and negotiation of status and resources."

Professor Robertson's article obviously is a result of thorough research, and it is supported by 327 footnotes. It signals the growing acceptance of the LPO industry, not only in the commercial world of corporate clients and law firms, but also among legal academia. Today, LPO is a robust, established industry. Though not as big as the software industry, it has reached a stage where there is no turning back. The end consumers of legal services, be they individuals, law firms, or corporations, are realizing the benefits. Corporations in particular have begun to mandate their attorneys and law firms to leverage offshore talent at LPO companies. This is the reason why even the large law firms, some of which are among the AmLaw 100 and the UK's "Magic Circle," and which otherwise would be the last to even consider offshore legal outsourcing, are now engaging in it.

The bottom line, of course, is to get more "bang for the buck," without any compromise in quality. However, it is perhaps the disaggregation of legal tasks, resulting in most LPOs performing only a fraction of the overall legal job at hand, which has led to the perception that LPO companies do only low-end, "grunt" work, or in other words, "the chore, but not the core." There may be some truth in this, but it does not reflect the entire reality. As Professor Robertson's notes in her article, there are several offshore legal outsourcing companies, though few in number, and sometimes smaller in size, which do cutting-edge work that requires immense legal, analytical, and writing skills.

Professor Robertson's article also coincides with some noteworthy developments in the LPO field that may signal the beginning of a phase of both consolidation and continued expansion. Recently, the Gurgaon-based LPO, UnitedLex, acquired another player in the LPO market, LawScribe. Until then, the only other notable acquisition in the industry was Mysore-based Software Paradigms (India) Ltd. ("SPI") taking over the entire LPO business of another local player, Comat Technologies, in late 2007. Soon after this month's UnitedLex/LawScribe transaction, the industry was witness to another acquisition that made UnitedLex's buy seem relatively small: the Thomson Reuters acquisition of a 100% stake in Pangea3, arguably India's largest pure-play LPO in terms of both personnel and turnover.

The Thomson deal is significant, not just because of its speculated but unconfirmed size of $35-100 million, but - more importantly – because the world's largest legal publisher has put its money into offshore legal outsourcing, which perhaps it sees as the future of the legal industry. Thomson's acquisition is bound to silence many of the LPO naysayers in the West, who have repeatedly predicted the downfall of the industry, wishfully but ignorantly regarding it as a passing fad. To the contrary, The Thomson deal is also likely to result in other big names in the legal industry investing in LPO. As Professor Robertson correctly noted in her prescient article, offshore legal outsourcing seems destined to "reshape the practice of law."

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* Sanjay Bhatia is Head of Operations at SDD Global Solutions, one of India's leading providers of high-end legal outsourcing services, and the only Indian legal outsourcing company managed by a U.S. law firm. He is a graduate of India's top-ranked National Law School. SDD Global has offices in Mysore, Bangalore, New York, and London. SDD Global recently ranked as the #1 outsourcing company in India, and #2 in the world, out of over 2,700 companies evaluated, according to the 2010 survey of 6,547 clients by The Black Book of Outsourcing.

November 24, 2010

Today's Economic Times reports that the Thomson Reuters acquisition of offshore legal outsourcing leader Pangea3 was valued at $100 million, "according to a person close to the development." Since the venture capital company Sequoia jointly owned 50% of Pangea3 at the time of Thomson's purchase of 100% of Pangea3's shares, with Sequoia having invested $7 million, Sequoia may have done very well indeed. “This is a fantastic exit for Sequoia as we have a complete cash deal,” reportedly said Sumir Chadha, the managing director of Sequoia Capital India. Here are some excerpts from the article:

Private equity major Sequoia Capital has recorded one of its most profitable exits and its fourth for the year with the sale of legal process outsourcing (LPO) firm, Pangea3. Global information services major Thomson Reuters bought the Mumbai-based firm on Friday last week and the deal was valued at $100 million, according to a person close to the development.

Sequoia Capital invested $7 million in Pangea3 in 2007, while another investor Glenrock Group put in over $4 million a year earlier. The two PE investors jointly owned 50% of the LPO firm set up by entrepreneur duo Sanjay Kamlani and David Perla.

“This is a fantastic exit for Sequoia as we have a complete cash deal,” said Sumir Chadha, managing director, Sequoia Capital India. The fund has seen three major exits this year including the public listing of SKS Microfinance and a partial exit from Dr Lal Path Labs. The fund also sold its entire stake in Manappuram Gold Finance through a public market sale.

* * *

"This was an M&A deal that came at the right time; we are a six-year-old firm and as with all VC-backed firms there is expectation of return for shareholders,” said Sanjay Kamlani, co-founder, Pangea3, who will continue to run the firm along with the existing team. "The management is committed to growing the business further," he said. Kamlani and Perla along with other employees owned the balance 50% of the firm that has a roster of big-ticket clients including top 250 law firms in USA.

November 23, 2010

No, the headline above is not a typo. In a Report and Discussion Draft announced today, the American Bar Association Commission on Ethics 20/20 has issued what amounts to a ringing endorsement of offshore legal process outsourcing, while making sure to say that it is not an endorsement. ("[t]he changes... recommended herein constitute neither endorsement nor rejection of the practice of outsourcing by lawyers and law firms.")

No doubt the above disclaimer is due to the backlash the ABA encountered from some free-lance contract attorneys and others two years ago, in response to the ABA Formal Ethics Opinion 08-451. In that Opinion, the ABA Standing Committee on Ethics and Professional Responsibility came right out and "saluted" the outsourcing of legal services. ("The outsourcing trend is a salutary one for our globalized economy.") In the 2008 Opinion, the ABA Committee went on to mention that "outsourcing affords lawyers the ability to reduce their costs and often the costs to the client," allowing law firms to better represent clients "effectively and efficiently." In the Committee's words, which apply to in-house counsel as well as law firms: "There is nothing unethical about a lawyer outsourcing legal and non-legal services, provided the outsourcing lawyer renders legal services to the client with the 'legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation.'" (Quoting Model Rule 1.1.)

In the new Report and Discussion Draft, the ABA Commission proposes nothing that contradicts the 2008 Opinion. Instead, in the Report, the Commission further extolls the success, virtues, and "appeal" of legal outsourcing, while of course being careful not to "endorse" it. The Commission even goes so far as to rebut complaints that offshore legal process outsourcing inevitably results in ethical problems such as breach of confidentiality and conflicts of interest. Below are some relevant excerpts from the Commission's Report:

The outsourcing of work domestically and internationally, although not new to the legal profession, is becoming increasingly widespread. The ABA Standing Committee on Ethics and Professional Responsibility and other state and local bar associations have recognized the reality of outsourcing and issued many opinions or reports giving guidance on how to outsource ethically.2 ABA Formal Opinion 08-451, entitled “Lawyer’s Obligations When Outsourcing Legal and Nonlegal Support Services,” identified key ethical considerations lawyers should take into account under the Model Rules of Professional Conduct when outsourcing domestically or internationally. To date, however, the Model Rules and their accompanying Comments do not specifically address outsourcing.

* * *

The changes to the Comments to Rules 1.1, 5.3, and 5.5 of the Model Rules of Professional Conduct recommended herein constitute neither endorsement nor rejection of the practice of outsourcing by lawyers and law firms. Rather, they are an important and direct response to the existence and growth of outsourcing practices, intended to help lawyers engaging in the practice to do so ethically and responsibly.

* * *

Among the factors that have contributed to the significant growth of outsourcing are the technology-driven enhanced ability to provide cost-effective “24/7” service to clients and faster turnaround for labor-intensive projects; the enormous growth of electronic discovery; the dominance of the English language in law and commerce; and the steady escalation of legal fees.

For several reasons, outsourcing may appeal to the clients of U.S. lawyers and law firms as well as to the lawyers and law firms themselves. The work may be better done outside the firm because of efficiencies developed and utilized by providers of outsourced services. There are potential and possibly substantial cost-savings, whether the work is outsourced to providers in the U.S. or elsewhere. This cost differential may be of particular benefit to solo practitioners and small and medium-sized U.S. law firms, allowing them to compete more aggressively for large matters without fear that if they secure employment by the client they may lack adequate resources to perform the legal work.

* * *

Exploring the range of additional guidance currently available to lawyers, the Commission reviewed materials from domestic and international outsourcing providers themselves, finding substantial evidence that the providers are also focused on the ethical considerations and obligations identified in the organized bars’ ethics opinions, and that they are motivated to do so. Protocols developed by the providers of outsourced legal and non-legal services evidence their use of ever more sophisticated technology to ensure quality control of the outsourced work, to provide adequate security over personnel and information, and to increase the opportunities for and convenience of oversight by the lawyers and law firms that are outsourcing the work.

Information the Commission reviewed shows that, for example, a wide variety of effective procedures are in place to protect the confidentiality of client information. Lawyer and nonlawyer employees of many outsourcing providers are required to sign confidentiality agreements, with some firms requiring employees to sign new and separate confidentiality agreements for each new assignment. Although the details of security measures implemented by outsourcing companies are often proprietary, certain generalizations are possible. The most effective of these measures include the use of the most up-to-date information security technology (e.g., for encryption, anti-virus, transmission, storage, and permanent deletion of information); use of biometric and other security measures for access to premises or data (including separate premises or areas for each project); maintenance of continuous video monitoring, monitoring of employee computers, disabling of employee computers’ portals for portable data storage devices, and repeated identity checks on admission to buildings, elevators, and other areas where work is being performed; extensive background checks on employees; and periodic internal and external audits of all of the foregoing measures.

The Commission heard from a number of sources that conflict-of-interest considerations are increasingly given careful attention. For example, a number of outsourcing providers conduct conflicts checks modeled after those conducted by large U.S. and U.K. law firms; others are developing similar systems. These may include maintaining extensive data bases for existing and former clients and screening the work history of new recruits and existing employees against both the information contained in the data bases and information supplied by the client.

Industry awareness and responsiveness to the ethical concerns and obligations of U.S. lawyers and law firms are resulting in outsourcing firms seeking input from and collaboration with the organized bar, and with lawyers and law firms, in the development of ethics policies and training regimes for the lawyer and nonlawyer employees of service providers. The Commission’s research has determined that a number of companies that provide outsourced services have established sophisticated training programs for nonlawyer and lawyer employees on a variety of topics, including U.S. substantive and procedural law, legal research and writing, and the rules of professional ethics. There may also be specific training to address the particularized needs of a client or project.

Regarding the Commission's proposed changes to the Comments in the Model Rules, as suggested in today's Discussion Draft, again they do not depart from the ABA's previous Ethics Opinion. For example, here is the proposed new comment to Model Rule 1.1 on "Competence":

Retention of Other Lawyers

[7] A lawyer may retain other lawyers outside the lawyer’s own firm to provide or assist in the provision of legal services to a client provided the lawyer reasonably concludes that the other lawyers’ services will contribute to the competent and ethical representation of the client. The reasonableness of the conclusion will depend upon the circumstances, including: the education, experience and reputation of the nonfirm lawyers; the nature of the services assigned to the nonfirm lawyers; and the legal and ethical environment in which the services will be performed. When retaining lawyers and others outside the lawyer’s own firm, the requirements of Rule 5.5 (a) must be observed. When using the work of nonfirm lawyers in providing legal services to a client, a lawyer must also reasonably conclude that such work meets the standard of competence under this Rule. If information protected by Rule 1.6 will be disclosed to the nonfirm lawyers, informed client consent to such disclosure may be required. For example, if the rules, laws or practices of a foreign jurisdiction provide substantially less protection for confidential client information than that provided in this jurisdiction, the lawyer should obtain the client’s informed consent to such disclosure.

The Commission makes a similar, almost identical proposal for a new Comment to Model Rule 5.3 on "Responsibilities Regarding Nonlawyer Assistants."

“We’re in an outreach mode of soliciting public comment,” says Judge Kathryn A. Oberly, from the District of Columbia Court of Appeals, who chairs the Commission's outsourcing working group. “It’s a draft proposal, but we’re not wedded to it. The point of our draft is to get comments from anybody and everybody who wants to comment on it. We’ll see what people have to say.”

The Commission will receive comments through January. After that, the outsourcing working group will review its draft before preparing a final version for consideration by the full commission. Then, depending on the nature of the final recommendations, the House of Delegates may consider them. While the Commission has set no specific schedule, it expects to submit most of its recommendations for consideration by the House during 2012.

November 21, 2010

Infosys LPO, the offshore legal outsourcing arm of the legendary IT company, Infosys Technologies, is expanding from Pune, Bangalore and Gurgaon into Manila, where it plans to hire 50-100 employees for starters. This is according to a report in today's Hindu Business Line, by Moumita Bakshi Chatterjee. The reason given is the preference of some Infosys clients for The Philippines, where the legal system is perceived to be more similar to that of the United States, and where Infosys already has a presence:

“We will expand to Manila proactively. India has a large talent pool but the legal system in Manila is more aligned to the US system. Hence, some select clients are citing that as a preference. Also, Infosys BPO already has a large centre in Manila and we can leverage that for LPO operations,” said Mr Rahul Shah, Associate Vice-President, Principal – Knowledge Services, Infosys Technologies.

According to the article, Infosys LPO has grown to over 500 professionals, mostly in Pune, and the company is planning expansion not only to The Philippines, but also to onshore locations:

LPO engagements account for 60 per cent of the total knowledge services business of Infosys, with over 500 professionals and $15 million in annual revenue. Bulk of the work is done from Pune (about 400 professionals), followed by Bangalore (80-100 professionals) and Gurgaon (about 20 professionals).

Mr Shah said that Infosys, in certain cases, is also seeing demand for onsite delivery of LPO services. “The legal industry is fairly conservative. From cost or efficiency perspective, if a CFO has to push LPO, he may have to show that near-shore or onsite model is possible,” Mr Shah added.

Currently, the LPO service delivery is primarily offshore, with some client interfacing and sales professionals based onsite (in close proximity to client location). “But, there are clients who want to embed people onsite as part of service delivery, either due to the sensitive nature of work being outsourced or because of staff shortage at their end,” he said.

Given this, the company is now considering onsite presence within the US, a market that brings in nearly 70 per cent of Infosys' LPO revenue.

“In the next two years, we expect our US-based personnel to contribute 10 per cent of our overall delivery revenue,” he added.

The above news regarding Infosys highlights the fact that the Philippines apparently poses the biggest competition to India in relation to legal outsourcing services. The Philippines, like India, has thousands of English-speaking lawyers who can offer their services at a fraction of the cost of what US lawyers provide. Also, the Filipino legal system borrows much from that of the US. American lawyers not only created the country's legal system, but also founded the key law firms and the top law schools there. The Philippines law school curriculum is also patterned after that of US law schools.

Despite all that, the fact remains that law schools, whether in the US, India, or The Philippines, for the most part do not train their students to perform legal work. Similarly, experience in the legal system of a foreign country, even in the Philippines, does not always equate to better preparation for performing LPO or legal KPO (knowledge process outsourcing) services for US clients. It can even be a detriment, as applicants with "experience" often come with "attitude" as well. They sometimes need to "unlearn," as much as learn. Often, the key attributes of successful offshore legal outsourcing recruits involve intelligence, aptitude, ambition, eagerness to learn, command over the English language, and low cost of living. Given those factors, plus the vastness of the Indian talent pool, India still seems to have the edge.

November 19, 2010

One thing that the legal, financial, educational, and news information giant, Thomson Reuters, has not been accused of is ignorance. Given that this multi-billion-dollar company announced yesterday that it has acquired 100% of the shares of Indian legal outsourcing provider Pangea3, after also recently deciding, for "strategic" reasons, to sell its profitable and high-profile U.S. bar exam preparation course (BAR/BRI), you can assume that some very smart money is betting on a tectonic shift in the Western legal landscape.

Did you politely nod along in conversations about India and “legal processing outsourcing,” all the while thinking that it was just a fad? That U.S. law firms would ultimately somehow win back the work by figuring out how to do it better, faster, cheaper?

Well, the news that data and information giant Thomson Reuters is buying Pangea3 should extinguish some of that lingering skepticism.

If there are any lawyers in Canada that seriously think that the legal world will remain unchanged, you better hope that they’re not managing your firm, nor your law society.

Pangea3, one of the largest and perhaps better known LPOs in the world has just been gobbled up by Thomson Reuters and will be seeking even greater expansion into legal services worldwide. Note: if those who run your law society, or your firm, don’t know what an LPO is, you’re in even greater trouble.

This is a legal earthquake equivalent to 10.0 on the Richter scale; the world’s largest legal information company acquiring the world’s largest LPO.

Law firms and regulatory bodies better have a well thought-out business answer to this – other than the typical, unthinking ring fencing response that will ultimately prove to be the demise of lawyers.

It is well past time to face the fact that law is a business. And we better start acting like businesses, or soon, we’ll all be “out of business.”

Hang onto your hats, your legal world is about to get rocked.... So Thomson wants out of the “preparing American attorneys” market, and in on the legal outsourcing market in India. ARE YOU SERIOUS? Now go back and read the BAR/BRI email, especially this line: “Our parent company believes, however, that bar preparation no longer fits its long-term strategic vision.” That can’t be good. That simply cannot be a good sign that Thomson evidently thinks there is more money to be made from Indian lawyers doing American legal work than from training American lawyers to do American legal work.

LegalWeek magazine opines that "[t]he entry of Thomson into the LPO market will be viewed as evidence of the high expectations being placed on the model to shake up the commercial legal market."

Offshore legal outsourcing, or legal process outsourcing (LPO), or legal KPO (knowledge process outsourcing), or whatever you want to call it, has been generating both media hype and actual substance for years. But this latest development represents a serious, objective, outside validation.

Congratulations are due to Sanjay Kamlani, David Perla, and the rest of the Pangea3 team, for being the most successful pioneers in this still nascent industry. When they started their company in 2004, employees reportedly were sitting elbow-to-elbow in a less than savory office in Mumbai, making cold calls to the U.S. in a search for business. More recently, Pangea3 has attracted the creme-de-la-creme of Western corporations and law firms, and it's staff now work in gleaming, multi-million-dollar-funded offices in posh neighborhoods. Many of them have (or we should say, had) shares in the company, such that now they are cashing in, and deservedly so.

Pangea3 has been an inspiration to countless other LPO companies that have followed in its wake, even if not all of them have followed its model of pursuing high-volume document review. Pangea3 is among four legal outsourcing companies (along with American Discovery, SDD Global Solutions, and UnitedLex) that recently were ranked among the top 50 outsourcing companies in the world, ahead of over 2,700 other players, according to the 2010 survey of 6,547 clients by the Black Book of Outsourcing.

Regarding the Thomson Reuters deal, we want to reiterate that for Western law firms, this is a wake-up call, but not a death-knell. It is worth repeating that legal process outsourcing does not threaten the existence of U.S. (or U.K.) law firms. Unless you want to define Western law firms as inherently dinosaur-like, and incapable of changing to avoid extinction. The threat is not to law firms themselves, but to an outmoded model of law practice that clients increasingly will not tolerate. We are witnessing the start of a positive, paradigm shift in the way that legal services will be delivered in the West.

Several law firms are embracing the change, and reaping rewards from it. Those firms are receiving more assignments and more client revenue, not less. This is coming in part from (a) existing clients who send them “elective” legal work that otherwise would never be performed, due to cost, but which is not a problem when Western lawyers are paid to supervise and edit the work of attorneys in India, and (b) new clients who come to those law firms only because of their reputation for developing an alternative to the old model.

So there is no need to start making funeral arrangements for the Western legal industry. Forward-thinking law firms will adapt, embrace off-shore legal outsourcing, and learn how to make it serve not only the interests of their clients, but their own.

November 18, 2010

Its official. The following is today's announcement from Thomson Reuters:

NEW YORK and MUMBAI, India, Nov. 18, 2010 -- /PRNewswire/ --Thomson Reuters, the world's leading source of intelligent information for businesses and professionals, today announced that it has acquired Pangea3, a fast-growing legal process outsourcing (LPO) provider serving corporate legal departments and law firms worldwide. Terms of the deal were not disclosed.

The acquisition extends the Thomson Reuters strategy to develop world-class information, software and workflow solutions for legal professionals around the world. Pangea3 is headquartered in New York and Mumbai, India, and has 650 employees at its major delivery centers in Mumbai and New Delhi. Pangea3's client base includes Am Law 250 law firms and some of the world's largest financial services, pharmaceutical, healthcare, food and beverage, technology and consumer goods companies. The firm offers a variety of services organized into four distinct lines of business including legal document review; corporate transactions; intellectual property; and risk management and compliance.

Peter Warwick, president and chief executive officer of Thomson Reuters, Legal, said legal process outsourcing adds a vital strategic complement to the Thomson Reuters portfolio of specialized information and workflow solutions, and will be key to helping law firms and corporate legal departments be more responsive and cost-effective. "Pangea3 is true to our mission to help the legal system perform better, every day, worldwide; we will now bring to the legal marketplace a responsive, high-quality, transformative resource for a broad range of legal support work. This is particularly important as law firms and general counsel adjust to the realities of the 'new normal,' where efficiency, quality and responsiveness are paramount," he noted.

Pangea3 is seen as the world standard in the LPO marketplace, which is growing at more than 20 percent annually and projected to exceed U.S. $1 billion this year.

"The addition of Pangea3 to the Thomson Reuters family creates a solid foundation in the global solutions suite that is a perfect fit in our long-term growth strategy," said Tony Abena, president and general manager, Global Legal Solutions. "With overlays in key segments including our Corporate General Counsel, IP Solutions, Governance, Risk and Compliance and Law Firm businesses, we're aligning ourselves more closely into general counsel and law firm workflows. Pangea3 brings to Thomson Reuters a broad and rapidly growing client base, and a reputation that is unmatched in the LPO marketplace. I'm very pleased to welcome the Pangea3 team to Thomson Reuters."

"Joining forces with Thomson Reuters will further accelerate and expand our ability to provide impactful and transformative solutions to our corporate and law firm clients," said David Perla and Sanjay Kamlani, co-CEOs of Pangea3. "Thomson Reuters is the perfect partner for Pangea3's clients and team-members to continue to grow and solve the increasingly complex and expensive challenges facing legal professionals around the globe."

"Pangea3 has been a valued provider for me, and is an attractive alternative for my clients," said Jeff Jaeckel, a partner at Morrison & Foerster and head of Morrison & Foerster's Washington, D.C. and Virginia Litigation Department. "We look forward to even bigger and better solutions as Pangea3 joins forces with Thomson Reuters."

Founded in 2004 by Perla, formerly Monster.com vice president, Business & Legal Affairs, and Kamlani, who was OfficeTiger CFO and general counsel, Pangea3's team of top-tier legal talent uses rigorous Six Sigma methodologies to ensure high-quality legal services. Perla and Kamlani will continue in their current roles, and all 650 Pangea3 employees will join Thomson Reuters, remaining based in their New York, Mumbai and New Delhi offices. For more information, visit http://www.pangea3.com.

About Thomson Reuters

Thomson Reuters is the world's leading source of intelligent information for businesses and professionals. We combine industry expertise with innovative technology to deliver critical information to leading decision makers in the financial, legal, tax and accounting, healthcare and science and media markets, powered by the world's most trusted news organization. With headquarters in New York and major operations in London and Eagan, Minnesota, Thomson Reuters employs 55,000 people and operates in over 100 countries. Thomson Reuters shares are listed on the Toronto and New York Stock Exchanges. For more information, go to www.thomsonreuters.com.

In yet another consolidation exercise, financial news and business information provider Thomson Reuters is all set to acquire legal process outsourcing firm Pangea3. The deal is expected to be formally announced in the next one or two days, said sources. The total deal value could be in the range of $35-40 million (around Rs 157-200 crore).

This is the second acquisition by Thomson Reuters in India. Pangea3, founded by David Perla and Sanjay Kamlani, has private equity investment from The Glenrock Group and Sequoia Capital. The company is expected to have an annual revenue of $25-30 million.

“Pangea3 will be making an official statement to its employees tomorrow,” said a source close to the deal. The Glenrock Group had led an invested of $4 million in 2006 and Sequoia Capital invested $7 million in 2007.

When contacted, Sanjay Kamlani, the co-CEO of Pangea3 said: “Every second month there is speculation that either we are acquiring some company or someone else is acquiring us. We have never commented on such speculation and I will not comment on this news either.”

Pangea3, which has over 650 employees, offers services like patent analytics and patent prosecution services, legal research, business and competitive intelligence services, commercial contracting and licensing services among others.

For Thomson Reuters, the acquisition fits into its legal services offering. Other than the financial news and business information services, the firm also has a presence in the healthcare and science, legal and tax and accounting segments. This acquisition will fit into the Thomson Reuters legal business unit, which has a revenue of $3.6 billion and has 14,300 legal experts globally.

When contacted, Thomson Reuters said: “We do no comment on merger and acquisition activity.” Meanwhile, Tarun Anand, Managing Director and Senior Company Officer, South Asia, said the company was looking at the inorganic growth route in India. “We have earlier acquired Indlaw Communications. So the inorganic route is clearly an opportunity for us. We would look at acquiring in the legal space as well as in the healthcare and science space,” said Anand at a press conference held on the launch of its new financial desktop platform.

Thomson Reuters has about 8,400 employees in India. At present, in India almost 90 per cent of the firm’s business comes from its financial and business information segment.

The LPO segment is one of the fastest growing sub-sectors in the knowledge process outsourcing (KPO) domain. Revenue growth between 2010 and 2015 is expected to be approximately 26 per cent annually. Currently, there are over 5,200 professionals in the LPO industry in India and the Philippines, contributing an annual revenue of approximately $300 million (around Rs 1,362 crore), and this is expected to reach 18,000 professionals with an annual revenue of $960 million (around Rs 4,320 crore) by December 2015, said a report by Evalueserve.

November 16, 2010

The widely read and debated New York Times article last August on the subject of offshore legal outsourcing ("Outsourcing to India Draws Western Lawyers") led to a litany of comments from veteran U.S. lawyers saying essentially that the sky is falling. In particular, one of the most frequent complaints was that the sending of document review assignments to offshore legal process outsourcing (LPO) companies deprives young Western lawyers of crucial training opportunities. Below are excerpts from a few of those many comments:

"Document review is essential training for any corporate lawyer or litigator...."

"Denying American and British associates the opportunities to engage in meaningful document review will only produce third-rate senior lawyers."

"The whole point of having Junior Associates do the grunt work is to train them and make them experts."

"Isn't that grunt work done by young lawyers how they learn to be good lawyers?

Now, at least one partner at a major Western law firm has gone public with the truth on this subject. ALB Legal News reports that Tony Denholder, a partner at the top tier Australian law firm, Blake Dawson, said the following at last week's Australian Corporate Lawyers Association (ACLA) conference: "I think it is very naive to think that lawyers can't learn unless they are snowed under with repetitive, low level legal work."

Perhaps Mr. Denholder used the word, "naive," with reference to inexperienced persons who might believe that the above-quoted complaints are anything other than attempts to justify the extremely lucrative "pyramid system." This is the money-making machine that the General Counsel of Cisco Systems famously described as "the last vestige of the medieval guild system to survive into the 21st century." Under the law firm pyramid structure, corporate clients traditionally have been asked to pay a king's ransom for massive hourly billing by an army of junior associates at the bottom, who do not know what they are doing, and who, as a result, conveniently bill more hours.

As any candid veteran of large law firms could report, no serious legal training of young associates takes place while they are stuck in a room with boxes of documents, or in front of a computer screen with thousands of pages of mostly meaningless discovery material flashing before their eyes. If any senior lawyer wants to provide a meaningful opportunity for young associates to grow, he or she can train them how to do deals, how to argue in court, how to supervise cases, and how to provide legal advice. None of those things can be done for U.S. or U.K. clients by legal outsourcing companies in India, the Philippines, or anywhere else.

November 11, 2010

For years, experts on the legal process outsourcing industry have been predicting a consolidation in the number of LPO players, as the offshore legal outsourcing industry matures. Over a year ago, Rahul Jindal reported in his pathbreaking "Legal Process Outsourcing" blog that a variety of deals and acquisitions had already occurred, but that they were leading to an increase in the number of legal outsourcing companies, not a decrease:

The LPO industry has in a span of few years seen major mergers and acquisitions, partnerships and alliances. The first acquisition happened when Mysore-based Software Paradigms International (SPI) India acquired the entire BPO/LPO clientele of Comat Technologies across the US and UK, which was served by Comat’s Mysore-based operations. Such deals are indicative of the pace of growth of the industry. Gavin Birer in his article “Recession” “Depression” Unemployment” “Meltdown” “Crisis” … wrote “The IT industry took 13 years to come to maturity, BPOs took half a decade and now LPOs are emerging in a big way.” Even magic circle firms like Clifford Chance are taking interest in doing business in the Indian subcontinent. Established LPOs including Pangea3, Jurimatrix and SDD Global have attracted a significant level of private equity and venture capital. Big players like CPA Global have entered into strategic alliances to further enhance their products thereby giving an edge to their services. In 2008, CPA Global entered into an alliance with major electronic discovery software provider Applied Discovery Inc., a division of Lexis Nexis. The relationship ensures that CPA’s clients around the world benefit from a total review and e-discovery solution. Such tie-ups have played an instrumental role in making LPO a fast growing business. Recently UnitedLex entered into an alliance with Huron Consulting Group as well as Ocean Tomo, thus further enhancing and enriching the quality of their services and expanding their market. In terms of mergers and acquisitions, in 2008, Integreon acquired Datum Legal. CPA Global in the same year acquired SVPG to strengthen formers’ presence in German market. In short, business deals in the LPO space has made the industry grow from few vendors to more than 100 within a remarkable short period of time.

Today, however, comes news that one LPO is buying another LPO, which seems to be the first high-profile example of actual consolidation, rather than growth or proliferation. Below is today's press release from UnitedLex, recently ranked as one of the top four outsourcing companies in the world (along with two other legal outsourcing vendors, namely, Philippines-based American Discovery and India-based SDD Global Solutions), out of over 2,700 companies evaluated in the 2010 Black Book of Outsourcing satisfaction survey of 6,547 clients:

OVERLAND PARK, Kan. - (BUSINESS WIRE) - UnitedLex, a global full service provider of technology powered legal and business solutions, today announced that it has successfully completed the acquisition of LawScribe, a leading Legal Process Outsourcing company based in Los Angeles, California.

Founded in 2004, LawScribe provides legal services in eDiscovery and document review, intellectual property, corporate transactions, legal research and support. With offices in Los Angeles, New York, and Gurgaon, India, LawScribe serves Am Law 100 law firms, Fortune 500 companies and national legal organizations around the globe.

LawScribe has been recognized as an industry leader, delivering consistently high quality, cost effective legal support services. With LawScribe's deep domain capabilities and tradition of thought leadership, UnitedLex will expand its insight and applications to reduce costs and solve complex legal and business challenges.

"UnitedLex's industry leading technology and long standing commitment to multi-shore delivery made our decision to join them an easy one," said Kunoor Chopra, President and CEO of LawScribe. "This acquisition enables us to extend our service lines and further address market demands. Our clients will benefit from the combined scale and strength of our companies and UnitedLex's culture that attracts the industry's most experienced and sought after professionals."

About UnitedLex

UnitedLex (www.unitedlex.com) is a global leader in providing technology powered legal and business solutions. We deliver success in the fields of litigation, electronic data discovery, document review, contract review and management, intellectual property, immigration and law firm support. Leveraging more than 650 professionals in seven global offices and two data centers, UnitedLex empowers leading global corporations and law firms by providing them with the insight and applications to reduce costs and solve complex legal and business challenges. Our solutions approach has been carefully crafted to take advantage of our unique combination of strategic insight, deep industry expertise and technology.

November 08, 2010

A recent PricewaterhouseCoopers survey indicates that a quarter of the top UK law firms are turning to legal process outsourcing, as income for UK law firms in general has gone into free fall. Most UK law firms have seen lower revenues in the last year, driven by downward client pressure on pricing, together with a general contraction in the world market for legal services, according to PwC's 2010 law firms' survey.

In response to the decline in revenues resulting from the Western economic recession, many firms have turned to offshore legal outsourcing (LPO) and other cost reduction and restructuring programmes as a way to preserve profitability. The firms ranked 11-25 have seen the greatest pressure on revenues, the survey finds.

The survey indicates that the top 10 firms have benefited from scale and reach. The 11-25 tier, however, has continued to experience difficult market conditions. Outside the Top 25, a number of successful niche practices have emerged within the 26-50 ranking, with 5% of these firms reporting growth in fee income of between 11% and 15%.

Alistair Rose, partner and leader of the PwC professional partnerships advisory group, commented as follows:

"As in 2009, Top 11-25 firms have been under continued pressure on profitability. Despite an 8% reduction in their partner numbers and a 6% reduction in fee earner numbers, average profit per equity partner (PEP) still fell by nearly 1% to £441,000. This follows a 28% reduction in PEP in 2009. While our survey shows the Top 10 maintaining their breakaway position, it's worth noting that their average profit per partner is still some 17% lower than PEP in 2008.

"With a focus on cost reduction in 2010, it is not surprising that headcount reductions have been made by most firms. There is a notable difference, however, in the reduction in fee earner numbers, with the Top 10 scaling back by, on average, 6% compared to the 10% average reduction for the 11-25 firms."

The PwC survey suggests that support staff levels have been reduced in greater proportion than those for fee earners, supported in part by greater use of offshore outsourcing. Over the last two years, support staff numbers have been reduced by, on average, 25% in both the Top 10 and Top 11-25 firms.

"With the sustained market and financial pressure, it is perhaps not surprising that the number of Top 11-25 firms predicting mergers as 'fairly likely' in the next two to three years has risen from half of those firms in 2009 to 83% in 2010," Rose added.

The survey notes how partnership financing recently has received much attention. Recent concerns over the availability and cost of bank funding to law firms appear to have been over-stated as, in aggregate, the level of bank funding to law firms has increased. However, the increase in the level of external financing is of note, particularly in view of recent high profile law firm failures. While Top 10 firms and those ranked 26-50 are opoerating at relatively conservative levels of external funding (26% and 33% respectively of total funding), it is again the 11-25 firms where the numbers are at their starkest (40% external financing, an increase of 13% from 2009).

The decline in headcount, together with other cost reduction steps, have resulted in a substantially lower cost base for many firms. Outsourcing of various processes continues to rise, and many firms envision more outsourcing measures in 2011 and beyond, particularly IT, accounting and HR. Regarding legal process outsourcing ( LPO ), the top 10 firms are leading the way. 25% of them already taken steps in this direction, with Asia, the Far East and Southern Africa the favored destinations.

PwC's Alistair Rose concludes as follows:

"Looking ahead, it appears the legal sector is approaching a tipping point. Many of the larger Top 10 firms have used the recent economic difficulties to focus on making their businesses more efficient and have taken innovative approaches to both back-office support and how they provide legal services. There is further to go, however, and firms acknowledge there is still a significant information gap in their understanding of clients' preferences and needs.

"There is ongoing pressure on firms ranked 11-25 and it is inevitable that a number will need to consider their response to ongoing, difficult market conditions, client pricing pressures and new entrants to the market."

November 04, 2010

I normally write on topics related to legal outsourcing ("LPO"), but like most Indians right now, I am thinking about corruption. The events leading to the recently concluded Commonwealth Games hogged headlines for all the wrong reasons. Almost every newspaper and Indian television news channel vied with each other to air “breaking news” that invariably related to the corruption involved in organizing the Games. Some of the controversies that shocked the collective conscience of the Indian public were:

Allegations that Mr. Sanjay Mahendroo, a member of the Sports Ministry, sent an e-mail dictating taxi rates to a vendor in London who was hired to provide cars and other services during the Queen's Baton Relay function in London last year. Mahendroo is said to have instructed the vendor to charge 450 pounds a day for each taxi, an exorbitant rate even when compared to hiring a BMW or Mercedes with a driver in London. (Incidentally, the same company was hiring out a Mercedes S Class for 150 pounds a day.)

Allegations that Australian based Sports Marketing and Management (“SMAM”), which was engaged for roping in sponsors for the Games, was paid 23 percent commission on all sponsorship deals that were signed, irrespective of SMAM's involvement in roping in the sponsors.

Allegations that the Organizing Committee paid Rs. 1,20,000 ($2,666) for each lamp post, which were not worth more than a few thousand rupees.

Allegations that the Organizing Committee paid Rs. 975,000 ($21,666) to rent a treadmill for 45 days, when the cost of the treadmill itself is less than Rs. 100,000 ($2,200).

Allegations that the government spent Rs. 971 crores (Rs. 9,710 million) on renovating the Jawaharlal Nehru stadium, when the cost of cost of construction of one stadium itself is about Rs. 81 crores (Rs. 810 million).

Allegations that the cost of the Games is close to £4.2 billion pounds, which is 100 times more than the initial estimate of £42 million.

Reading the above stories made the average Indian sick in the stomach. Are we so helpless that nothing can be done, other than rant about how corrupt our politicians are? Should the common man continue to be a mute spectator to the brazen corrupt practices by our “honorable” politicians and civil servants?

In India, the Prevention of Corruption Act, 1988 (“PCA”) is enforced by the Central Bureau of Investigation, the Central Vigilance Commission, state anti-corruption bureaus, and state vigilance commissions. The PCA is a penal legislation and does not provide for any form of public participation in the process of curbing corruption. Certain states also have the LokAyukta, an institution that helps expose corruption, mainly among the politicians and officers in the government service. Sadly, the LokAyuktas do not have binding powers to punish anyone. They can only recommend punishment, and their recommendations are rarely acted upon. Described as “watchdog[s] without teeth,” the Lokayuktas have so far not proved effective in checking corrupt practices.[1]

Given the present state of affairs, sadly, there is nothing much than an average citizen can do. While media houses expose corrupt practices and public-minded citizens file the occasional public interest litigation, invariably all such attempts die a natural death and are soon forgotten, or are overshadowed by newer instances of corruption of even more alarming proportions.

All this can change, and drastically too, if India chooses to pass a law on the lines of the [Federal] False Claims Act (“FCA” also known as the Qui Tam law)[2] prevalent in the United States.

At the macro level, the scheme of the FCA Act is simple. The FCA is aimed at fighting fraud against the United States government. The FCA creates civil liability for any person who “knowingly presents, or causes to be presented . . . a false or fraudulent claim for payment or approval” by the United States.[3] The defendant can be made liable for treble damages and a civil penalty of up to $10,000 per claim.[4] A private person (referred to as a “relator”) may bring a FCA claim (also known as a “qui tam complaint”) “for the person and for the United States Government . . . in the name of the Government.”[5] A qui tam complaint is filed in camera and remains under seal for at least sixty days.[6] During this period, the relator must present all material evidence to the government, and the government investigates and decides whether to intervene and proceed with the action itself.[7] If the government takes over the case, the relator may receive between 15 and 25 per cent of the government’s recovery, depending on the extent to which the relator contributed to the prosecution of the action, plus reasonable expenses.[8] If the government declines to intervene, the relator may proceed with the action on his or her own.[9] If successful after the government has declined, the relator can receive between 25 and 30 per cent of any recovery obtained, plus reasonable expenses.[10]

Additionally, certain states too have their own qui tam laws to check fraud upon the state government. States with False Claims Acts include: California, Delaware, the District of Columbia, Florida, Hawaii, Illinois, Louisiana, Massachusetts, Nevada, New Mexico, Tennessee, Texas, and Virginia.[11]

To the author's knowledge, there is no analogous law in India. This however has not deterred private initiatives to curb corruption. Tata Tea's “Jagore” campaign is well-publicized and immediately springs to mind. There are also instances of public-spirited citizens who relentlessly fight lone battles in seemingly David v. Goliath situations.[12] In fact, one entrepreneur lawyer, Mr. Shaffi Mather, has also advocated a “for profit” initiative to fight corruption.[13] Under this model, Mr. Mather envisages a business model where entities can be set up to fight corruption on payment of a fee (which, Mr. Mather asserts, will be lower than the bribe demanded). While Mr. Mather supports his idea with 42 success stories, it is still unfair for the victim to pay a third party to fight corruption. Also, Mr. Mather's idea does not address situations where the corruption results in both the sides benefiting at the cost of the taxpayer (for example, the scams pertaining to the recently concluded Commonwealth Games, where substandard equipment was supplied at inflated costs, and there were no “victims” other than India at large, because seemingly both the supplier and the decision maker on behalf of the government benefitted).

All said and done, none of the private initiatives mentioned above have statutory backing. This is where passing a Qui Tam law can provide a major impetus to private efforts to curb corruption. Statutorily empowering the common man to initiate claims on behalf of the government, and incentivising him in case of a successful claim will go a long way in providing checks and balances to ensure that those involved in corrupt practices actually pay for it. An effective qui tam law would help check fraud, not just upon the government, but also curb corrupt practices by government officials. It is unlikely that fraud upon the government can be committed without the active participation or connivance of someone within the government itself. Making government officers civilly liable for the frauds committed on the government is likely to curb kickbacks and procurement fraud, of the nature that have been alleged against the Organizing Committee of the recently concluded Commonwealth Games.

Some of the more common types of fraud against the government that can be curbed by passing a potent qui tam statute in India are:

Double billing - Charging more than once for the same goods or service.

Phantom employees and doctored time slips: Charging for employees that were not actually on the job, or billing for made-up hours in order to maximize reimbursements.

Pumping, mining or harvesting more natural resources from public lands than is actually reported to the government.

Being over-paid by the government for sale of a good or service, and then not reporting that overpayment.

Misrepresenting the value of imported goods or their country of origin for tariff purposes.

False certification that a contract falls within certain guidelines.

Billing in order to increase revenue instead of billing to reflect actual work performed.

Failing to report known product defects in order to be able to continue to sell or bill the government for the product.

Winning a contract through kickbacks or bribes.

Encouraging and empowering public participation is the key here. The sustenance and success of efforts to combat corruption are directly related to the extent of participation of civil society. The average citizen is indeed a stakeholder and the ultimate victim of corruption. Passing a civil anti-fraud statute and providing incentives to whistle blowers to initiate private actions (on behalf of the government) should go a long way in curtailing corruption at the governmental level. The strongest prerequisite for passing such a law in India is political will.

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* Sanjay Bhatia is Head of Operations at SDD Global Solutions, India's leading high-end provider of legal outsourcing services, and the only Indian legal outsourcing company managed by a U.S. law firm. He is also a regular contributor to the Law Without Borders blog on the topic of legal outsourcing, and he is a graduate of India's top-ranked National Law School. SDD Global has offices in Mysore, Bangalore, New York, and London. SDD Global recently ranked as the #1 outsourcing company in India, and #2 in the world, out of over 2,700 companies evaluated, according to the 2010 survey of 6,547 clients by the Black Book of Outsourcing.

[12] E.g., see shttp://www.legallyindia.com/20100121412/The-Bar-and-Bench/pil-vs-mining-giants-to-make-karnataka-rich, for story about Mr. Arun Agrawal's public interest petition presently pending before the Karnataka High court, where Mr. Agrawal alleges that mining companies like Arcelor Mittal and Posco will benefit unfairly from state concessions, causing a loss of $50 billion to the Karnataka Government.

October 28, 2010

Off-shore legal outsourcing (or legal process outsourcing - LPO) tends to occupy the center of discussion when the topic is globalization of legal services. When it comes to outsourcing media and intellectual property law-related work, the relationship of the Indian film industry and Hollywood should not be ignored. The increasing intersection between Hollywood and "Bollywood" will act as an important factor in determining the nature and scope of future international work generated in those areas.

The relationship between Hollywood and the Indian film Industry has existed for a long time. It started from use of foreign locations in early Indian cinema, and it has extended to finance, technology and storyline. Considering its relative late emergence, the Indian film industry has grown by leaps and bounds in the last few decades. More than 1300 movies were released in India in Hindi and other regional languages last year. This number is about three times that of Hollywood’s 463 movies. The revenues generated by these movies have also increased to Rs.130 billion (US$2.8 billion) from Rs. 87.8 billion (US$1.89 billion) in 2008. However, Hollywood still dominates the global film sector, generating 90-95% of the global revenue, by virtue of movies that are individually much more profitable..

The Indian film industry has been dominated by what we call “Bollywood” (situated in Bombay – now Mumbai), i.e. the Hindi film industry. However, other regional movie industries like Tamil and Telegu have also seen substantial development over the years. With globalization, the Indian film industry and Hollywood have influenced each other to give birth to a new genre of films and filmmakers. What makes the film industry unique relative to other sectors are the financial collaborations and ventures emerging from both ends. This includes not only finance, but also a substantial exchange of styles and artistic trends between the two countries. However, the interaction has not always been a smooth ride. Certain legal, social and creativity-related factors create differences between the two industries. On legal front, this calls for intervention on the part of government and judiciary to remove the unnecessary hurdles. On the other hand, more joint ventures between Hollywood and Indian film industry will generate a lot of legal work in the fields of copyright protection, export-import policy and other civil matters.

Hollywood’s Role in the Indian Film Industry

Hollywood films made inroads into the Indian film industry long ago. However, those films were mostly released at a belated date in India. There was a clear cultural gap between the Hollywood movies and Indian viewers. Additionally, rampant piracy in the form of “Video Cassettes” made Hollywood films unprofitable in India. Other factors that deterred the growth of Bollywood into a professional industry have included:

Fragmentation– the Indian film industry is a group of various regional industries and not a single concept. This reduces the marketability and profitability of films in India.

Narrow thinking – creativity was limited to making “popular/ idealistic films” while social and political issues were ignored,

Lack of management of funds – production funds were not raised and documented in a proper manner, thereby causing wastage,

Lack of commercial exposure globally – films were made keeping “Indian public” in mind, and not international viewers, and

Restrictive Approach in Foreign Investment Norms – presence of limitations on foreign holdings in Indian production companies, and requirements of government approval, discouraged foreign investors.

With the gradual liberalization of the Indian economy since the 90’s, more Hollywood movies have been released in India. We also have seen an increase in financing of Indian films by Hollywood producers. Columbia Tristar's "Saawariya," was released in 2007 as the first Hollywood-produced Bollywood film. It opened the gates for Warner Bros., Disney and Fox to finance their own Bollywood movies. This includes animated comedy, such as "Roadside Romeo," a Disney co-production with iconic Bollywood banner Yash Raj Films, in 2008. Fox Star Studios is producing "Dum Maro Dum," co-produced with Ramesh Sippy Entertainment. Disney is also targeting regional audiences such as Tamil and Telugu, and it has announced the production of its first films in these languages.[1]

However, the fate of some of these Hollywood-produced films thus far has not been very successful. Quite a few big-budget films like “Jaane Kahaan Se Ayi Hai,” “Saas Bahu aur Sensex,” “Chandi Chowk to China” (Warner Bros), “Saawariya” (Columbia Tristar) and “Roadside Romeo” (Walt Disney Pictures) have failed at the box office. The only exception has been “My name is Khan,” distributed by Fox Star Studios, was hugely successful in India and abroad. As another silver lining to the cloud, some recent films such as “Atihi Tum Kab Jaoge” by Warner Bros also have been hits. Also, “Thanks Maa” (distributed by Sony Pictures) was critically acclaimed and selected to be screened at international film festivals at Edinburgh, Busan, Montreal, Cannes and Palm Springs.[2]

In spite of the failure of some of these movies, certain similarities between the U.S. and India encourage joint ventures in the film industry. Both nations have a massive “movie-going” market. Also, the entertainment policies in these countries are fairly open (wide open in the U.S. due to the near absence of any significant content restrictions). This creates a free environment for creation of varied, innovative, and otherwise appealing plots. The main encouraging factor for foreign investment in Indian films is the rapidly swelling number of prospective ticket buyers. According to New York-based consulting firm McKinsey & Co., India’s middle class, with an annual per capita disposable income of $4,380 to $21,890, is expected to swell more than ten times to 583 million people by 2025.[3] Already, some experts are saying that it is currently larger than the entire population the United States. Even outside India, there are many "NRIs" (non-resident Indians), who are potential and actual viewers of Indian movies. Last but not least, the average cost of making a film in India is far less than that of Hollywood, further adding to the profitability.

One damper to Hollywood’s involvement in India has been piracy, which has only increased with the development of technology and more widespread exposure of international films among the Indian public. Piracy is also encouraged by other India-specific factors:

Deferring of movie release dates – Hollywood movies are often released in India weeks or months after they have released in the US and the UK. But while the release is delayed, the international publicity and buzz, especially on the internet, are not limited by borders, nor is the popular demand. So by the time such delayed films are released in India, most of the Indian audience already watched the movies via internet file-sharing and/or countefeit DVDs.

Technological Advancements – Developments in the field of DVDs/Blue Ray Discs and "Peer to Peer" sharing have made downloading and copying of movies extremely easy.

Low Per Capita Income - Due to low or no income, many people in India, especially students and other young people who are the target audience for most films, find it more feasible to rent a pirated DVD or download a movie rather paying to go to a movie theater. Also, a legitimate DVD version of a movie costs around 250 Rupees (about $5), whereas buying a pirated DVD costs ten times less. And of course, downloads through file-sharing are free. This huge difference in price further encourages piracy.

Piracy is also promoted by a weak or non-existent implementation of the Export-Import Policy of India. Import of any pirated films into India is specifically prohibited.[4] This includes import in any format, including videotape, VCD, LD or DVD. Indian Customs Law[5] imposes maximum jail term of up to three years on a person who is convicted of acquiring possession of such contraband, or who is otherwise found guilty of smuggling. Despite the strength of this law, the customs authorities almost never enforce it against importers of pirated motion pictures.

Another source of piracy in India is the broadcasting of unlicensed movies through cable networks. There are as many as 40,000 cable systems in India, and this huge number makes it nearly impossible to regulate their operations. The passage of amendments to the Cable Television Networks (Regulation) Act, 1995, had some effect in deterring cable piracy in India, though no actions have yet been brought under it.

The principal statute governing piracy in India is Indian Copyright Act, 1957. Under this Act, a civil suit or criminal complaint regarding copyright infringement can be initiated in a court that has jurisdiction.[6] The Indian government and various production houses have initiated several measures for better enforcement of copyright law. One such production house assigned a serial number, which was reproduced with every copy of the film made. Thus, it enabled convenient tracing of the source of a pirated copy. Also, the penalties for violation of copyright law have been increased.

In the last few decades, the development of international treaties has contributed to overseas protection of films as copyrighted work. India is also a signatory to these treaties. Some examples are the Berne Convention for the Protection of Literary and Artistic Works (1883), the Universal Copyright Convention (1952) and the Agreement on Trade Related Aspects of Intellectual Property Rights, 1994 ("TRIPS"). Under these, two kinds of protection are provided. Firstly, the works of a national of one member country are protected in another member country also. Secondly, the protection accorded to works of such foreign nationals in the other member country is similar to the protection and treatment given to its own nationals.[7] The elements of these treaties have also been incorporated into Indian Laws such as the Copyright Act, but the implementation of these changes have yet to be seen.

The foreign investment norms in India were very restrictive for the film industry until 2002, and for that reason, until then, Hollywood and overseas media players were dis-incentivized from investing in Bollywood. However, since 2002, Foreign investment in the film sector has been considerably liberalized, by allowing 100% FDI (foreign direct investment) in Indian companiesthat are involved in film financing, production, distribution, exhibition, marketing and/ or associated activities relating to the film industry.[8] However, there are no definitive laws on the issue of funding of individual film projects by foreign producers. This implies that for every individual investment in a film, as opposed to a company, the producers are required to take consent from the government. This is a cumbersome process and militates against joint ventures in film sector.

Indian Influence on Hollywood Films

India, being the second largest population in the world, has influence on the economies, art and culture of countries all around the world. Hollywood is not immune from this influence. An example is Baz Luhrmann’s 2001 musical "Moulin Rouge," a tragic romance told with "Bollywood"-influenced song and dance. Some of Indian films are released world-wide, with a good response. “My name is Khan” earned $17.6 million outside of India, which was more than its India earnings of $23.1 million.

India has not only been contributing culturally to the world, but also there has been a substantial financial contribution by Indian producers to Hollywood. This was fuelled by issues of global lack of funds after the recent financial crisis. Banks, private equity firms and hedge funds from countries such as the U.S., France, Germany and the United Kingdom had lost the courage to finance entertainment projects. These were once the main funding source for Hollywood. India was one of the least affected countries in the crisis, thanks to strenuous financial regulations and other factors. As a result, Indian investors have taken up the opportunity to invest in Hollywood projects. The outbound investment by Indian investors has been allowed by the Indian Government almost without any restrictions.[9]

One such example is Reliance Entertainment, which announced a slew of development deals with eight Hollywood-based production houses and committed $1 billion to make at least ten films by 2010. These production houses belong to famous Hollywood actors, and they include George Clooney's Smokehouse Productions, Nicholas Cage's Saturn Productions, Tom Hanks' Playtone Productions, Brad Pitt's B Entertainment, Chris Columbus' 1492 Pictures and Jim Carrey's JC 23 Entertainment.

Last year, Reliance Entertainment also announced that it had agreed to invest $825 million in Steven Spielberg's DreamWorks Studios. It also joined the ranks of large producers like Time Warner, Lions Gate Entertainment and News Corporation to bid for a stake in Metro-Goldwyn-Mayer. Followings its trail, other Indian production houses like UTV Software, Shemaroo and PVR Cinemas are also collaborating with Hollywood producers to produce American content.[10]

In addition to the above facts regarding financial resources, it may be surprising for many to learn that for quite some time, a majority of work relating to Hollywood animation films actually has been done in India. The Indian headquarters of Rhythm & Hues (R&H), a leading Los Angeles-based special effects studio, has worked in Babe, Alvin and The Chipmunks, Spider Man 2, Mummy Returns and Incredible Hulk.

Effects of Intersection on the Legal Industry

The ongoing intersection of Hollywood and the Indian film industry has its implications on legal profession also. In India until recently, media law relating to films mainly had been confined to infringement related work and compliance related work for film schedules. Due to the complexity of rules restricting shooting of foreign films, Hollywood projects require advice of Indian firms on issues such as risk exposure. However, with the increasing influence of Hollywood, the involvement of Indian legal professionals is becoming broader.

Big studios like Warner Brothers, Universal Studios, MGM, and Viacom’s MTV, as well as independent production houses, are taking legal advice from reputed law firms in India. Some of these are Nishith Desai Associates, Fox Mandal & Little, Titus & Co, and J Sagar Associates. These firms work on scripts and take the films through post-production, including naming and certification issues.

Musicals like Chicago and Moulin Rouge have been influenced by Indian musical-style filmmaking. Some other films, like Inside Man and Lord of War, have also used tracks from Hindi movies. For this, independent Hollywood agents are retaining Indian law firms to identify rights holders of original Hindi songs they want to use.

On the subject of modernization of the Indian legal system, India still needs to synchronize its entertainment laws to facilitate co-operation between Indian houses and those of other countries. Even now, there is still no clear definition of “foreign film” under any Indian statute. This creates confusion, in relation to the numerous “Hinglish” movies (Hindi films made in other countries with significant English influence) made nowadays. Indian law states that permission is required to be taken for shooting foreign films in India, from various authorities such as the Ministry of External Affairs. Unless and until the term “foreign film” is defined clearly, international filmmakers like Mira Nair and Danny Boyle may continue to be unsure as to whether their India-centric films are defined as "foreign." Also, as discussed, a lack of definite laws regarding Hollywood funding of individual Indian films makes it difficult for many foreign producers to make films in India.

Piracy is another important issue, which Indian laws should take into consideration. More emphasis should be given on implementation of existing laws like Customs Act, Copyright Act and Cable Act, for identifying and penalizing copyright infringement. Such uniformity will ensure more collaboration between Hollywood and Indian film industry. This will add a new dimension to legal services in the entertainment industry.

The problem of lack of implementation of Indian law can also be addressed by use of technology and practical steps. Movies released in 3D cannot be copied to DVDs, as they require special screens, sound systems and other equipments. Non-3D movies could be released in India simultaneously with their Western release, so that Indian viewers who want to see a film at the same time as it is being discussed and promoted on the internet and in the international media will not be encouraged to engage in piracy. Finally, movies can be released by use of internet or satellite technologies. This will help in hampering piracy, as most of the illegal physical copies are made from movie reels. However, such use of technology requires a mass-level upgrade of movie theatres, which will take time. Theatres with modern technology and 3D screens are being set up, but only in major cities.

With a better organized film industry and further co-operation with Hollywood, more legal work in the areas of drafting and negotiation of media contracts also is being generated in India. This creates demand for a new specialization in law, requiring detailed knowledge of both American and Indian copyright and entertainment laws. Also, copyright infringement disputes at an international level could be handled by this specialized group of lawyers. Considering the prospect of legal and professional co-operation between Hollywood and India, we can hope for a more unified and structured film industry, with adequate legal protection, in the coming years.

Recently, some of the demand for entertainment-related legal work has been handled by offshore legal outsourcing companies, often called legal process outsourcing companies or LPO providers. An example of a company handling legal outsourcing of entertainment-related work is SDD Global Solutions, headquartered in Mysore, Karnataka, but with other offices in Bangalore, New York, and London. SDD Global has done high-end legal work (such as legal drafting, and legal research and analytics) for many of the top companies in the film and television business, including Sony Pictures, HBO, 20th Century Fox, Channel 4, Media Rights Capital (Hollywood's largest independent film and television studio), and countless others.

With the growing intersection of the Western and Indian film industries, it seems that a new and large sector of legal services specialization in India is currently in the making.

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* Sayuj Banerjee is a lawyer at the high-end Indian legal outsourcing company, SDD Global Solutions. At SDD Global, which is the only Indian legal outsourcing company managed by a U.S. law firm, and which has offices in Mysore, Bangalore, New York, and London, Sayuj has worked on high-profile matters for major international media clients. After graduating with honors in 2008 from one of India's top law schools, the National University of Juridical Sciences (NUJS), Sayuj joined the mergers and acquisitions team of a leading India law firm, Economic Laws Practice. Subsequently, he also worked as a practicing advocate in the Calcutta High Court. Sayuj has developed significant expertise in drafting corporate transaction agreements, performing due diligence, preparing litigation related documents, and arguing matters before the court. Sayuj’s favorite area of work is intellectual property rights, and he has done substantial work in European patent law. His interest in learning and mastering media law and copyright law led him to join SDD Global Solutions, recently ranked as the #1 outsourcing company in India, and #2 in the world, out of over 2,700 companies evaluated, according to the 2010 survey of 6,547 clients by the Black Book of Outsourcing.

October 26, 2010

In a lengthy article by Gina Passarella on law.com (from The Legal Intelligencer), more evidence is given for the proposition that with the rise of legal outsourcing and other alternative delivery models, the legal world is undergoing a sea change, in which law firms must adapt to thrive, or even survive:

The legal industry is falling apart. Not in the sense pundits meant when they gave that diagnosis in 2008 as firms were hit with the harsh reality of the recession.

Rather, the industry is moving away from a monolithic provider of legal services -- the law firm -- to a fragmented service platform where the competition isn't just a broadening array of law firms, but legal process outsourcers and other non-law firm legal service providers as well. "Law firms are really being circled by these things," consultancy Adam Smith Esq. partner Janet Stanton said.

Firms have to decide where they want to compete and how, and what fits in their business model, she said.

Not only are LPOs and other firms that are adapting their business models a source of increased competition for law firms, Edge International consultant Jordan Furlong said, but so too are clients who are increasingly bringing more work in-house.

"The overall marketplace for legal services is fracturing," Furlong said. "It's unbundling and specialists are emerging. Legal work will go to the provider best designed for that particular work in terms of personnel systems and mindset."

Moreover, the consensus from the quoted experts confirms the increasingly prevalent belief that the changes are permanent:

The pressures from LPOs are real, they said. Law departments simply have to find ways to get what they need done for less money and they are slowly starting to realize that the quality isn't lost when using an LPO, Furlong said. Both Furlong and Stanton pointed to the increased hiring by many LPOs of seasoned, high-quality attorneys to do this work.

"I think this is permanent, which is rare," Furlong said. "Trends come and go all the time. This one I think is here to stay. I think it's driven more by clients than by lawyers, but mainly just by the marketplace."

LPOs have been created in direct competition to law firms with a goal of serving law departments and others are looking to get law firms as clients. Sometimes clients hire the LPOs and other times law firms do. On the whole, it seems the bulk of LPOs are servicing law departments and are being hired directly by law departments or by law firms at the express direction of their clients.

Stanton said she is increasingly seeing a move to master contracts in which law departments use a certain provider for all of a type of service and demand that their law firms hire that provider to do that work on their matters.

Many LPOs began by offering e-discovery or document review services, and that is work that will never come back to the law firm, she said.

"How many years ago did BMW stop making car radios?" she asked. "It's gone, it's not coming back."

Firms can either find a way to provide those same services economically or they can give it up, she said. LPOs aren't going to stop there. Stanton pointed to depositions as just one other area LPOs might look to get into.

The author adds, citing the example of Pangea3, that LPO companies "are increasingly capitalizing on the void left by firms that haven't adapted their value proposition":

David Perla, co-CEO of New York and Mumbai-based outsourcing company Pangea3, said 80 percent of his business continues to come from law departments. There is interest from younger partners at law firms who realize the market is changing and from firm management who want to be educated about outsourcing when clients ask about it. But Perla said he isn't sure whether law firms will make any major institutional changes in this regard.

Pangea3 will see a few million dollars in business this year from a law firm that brought the company work the firm's client simply wouldn't pay for young associates to handle.

Far and away, Perla said, the revenue and profit engine for his company is document review for litigation and government investigations. There is always a law firm working with Pangea3 on these matters, but the company is still most often hired by a law department. That is the one area where Perla said he could see law firms become more directly involved in the hiring.

The second-biggest revenue driver is corporate services, including contract drafting, review and revision; and mergers and acquisitions due diligence, he said. There is no law firm middleman in that situation, Perla said.

Pangea3 also handles intellectual property analysis, patent preparation, prosecution and IP asset management. The client mix there is much more diverse, with law firms using Pangea3 and not viewing the company as a threat, he said. The final component to Pangea3's business is risk management and compliance. That includes everything from managing committee minute books and SEC filings to business intelligence. Typically a company's chief compliance officer would hire Pangea3 for this work, he said.

Perla said he always guesses the 80-20 split will shift, with more work coming from law firms, but it never does. Because law departments are picking it up so rapidly and law firms are relatively slower, he doesn't see that ratio shifting soon.

The author concludes with the observation that although "some are hesitant to embrace LPOs, numbers speak volumes":

Perla said his company's slowest year in terms of growth was in 2009 when it grew 60 percent. Pangea3 just finished the first half of its fiscal year and had revenue greater than the full 12 months prior. He said the company is on track to grow 250 percent this fiscal year. Pangea3 wouldn't disclose its revenue, but media reports showed the company earned more than $8 million in 2008.

Some commentators predict fatal consequences for law firms as a result of all of the above. But as I mentioned in a previous post about legal outsourcing, it is really up to law firms to decide whether they are going to thrive or not:

Does [ legal process outsourcing ] threaten the existence of U.S. law firms? No, unless you want to define American law firms as inherently dinosaur-like, and incapable of changing to avoid extinction. No, the threat is not to law firms themselves, but to an outmoded model of law practice that clients increasingly will not tolerate. We are witnessing the start of a positive, paradigm shift in the way that legal services will be delivered in the West.

Several law firms are embracing the change, and reaping rewards from it. One example is my own firm. As a result of setting up our own legal outsourcing / LPO / legal services KPO company in India, our firm is receiving more assignments and more client revenue, not less. This is coming in part from (a) existing clients who send us “elective” legal work that otherwise would never be performed, due to cost, but which is not a problem when our U.S. lawyers are paid to supervise and edit the work of attorneys in India, and (b) new clients who come to our law firm only because of our reputation for developing an alternative to the old model.

So there is no need to start making funeral arrangements for the U.S. legal industry. Forward-thinking law firms will adapt, embrace off-shore legal outsourcing, and learn how to make it serve not only the interests of their clients, but their own.

October 20, 2010

UnitedLex, the U.S.-headquartered, global legal outsourcing company that made headlines earlier this year in snagging British Telecom as an LPO client, today announced it has been ranked 4th in the Global Top 50 Outsourcing Service Providers, by Datamonitor’s Black Book of Outsourcing. Notably, three of the four highest ranked companies, namely, American Discovery, SDD Global Solutions, and UnitedLex, are legal outsourcing providers. This reflects the rise of LPO (or legal services KPO - knowledge process outsourcing) in the outsourcing industry generally -- an industry historically dominated by IT/BPO (information technology/business processs outsourcing) companies.

Below are some excerpts from today's press release by UnitedLex:

"The [Black Book of Outsourcing] survey is the leading independent benchmark for customer satisfaction in the outsourcing industry."

“UnitedLex ranked among the top suppliers due to its continuous focus on customer satisfaction and quality and its ability to successfully manage outsourcing relationships.”

"The 2010 Black Book of Outsourcing survey is specifically designed to capture customer satisfaction ratings from users of outsourced services across the globe. Findings from the annual survey are presented in reports that investigate outsourcing markets by industry, geography and service domain. In addition to rankings of how individual vendors perform, reports typically contain analysis of the customer experience, market trends and advice on how to realize desired outcomes."

* * *

“The Black Book of Outsourcing results validate UnitedLex’s commitment to introduce outsourcing best practices into the legal industry and we are honored to be recognized as a leader in the general outsourcing category,” said Daniel Reed, UnitedLex’s Chief Executive Officer.... "To be selected from over 2,700 of the top organizations within the outsourcing industry is not only a tribute to the talented and hard-working team at UnitedLex but equally that the legal process outsourcing sector is maturing and adopting global best practices in line with more established sectors like information technology, finance and human resources.”

About UnitedLex

"UnitedLex (www.unitedlex.com) is a global leader in providing technology powered legal and business solutions. We deliver success in the fields of litigation, electronic data discovery, document review, contract review and management, intellectual property, legal research, immigration and law firm support. With offices in the United States, the United Kingdom, Israel and India, our more than 650 professionals provide deep domain and industry expertise in supporting Fortune 500 corporations, multi-national companies and global law firms. Follow us on Twitter: www.twitter.com/unitedlex."

About Datamonitor

"Datamonitor (www.datamonitor.com) is a leading provider of online database and analysis services for key industry sectors. We help our clients, 5000 of the world's leading companies, to address complex strategic issues. Through our proprietary databases and wealth of expertise, we provide clients with unbiased expert analysis and in-depth forecasts for seven industry sectors: Automotive, Consumer Packaged Goods, Energy, Financial Services, Pharmaceuticals and Healthcare, Technology, Transport and Logistics."

October 19, 2010

Michael Bell, in his blog, LPO Source: The Source for Legal Process Outsourcing, has called to our attention an interesting Wall Street Journal article by William S. Cohen, former U.S. Secretary of Defense in the Clinton Administration. Cohen cites persuasive, recent studies demonstrating that despite all of the usual anti-outsourcing political rhetoric, "the fact is that for every job outsourced to Bangalore, nearly two jobs are created in Buffalo and other American cities." Cohen also points out that the new U.S. jobs enabled by outsourcing are "higher-skilled and better-paying—filled by scientists, engineers, marketing professionals and others hired to meet the new demand created...." Here's an excerpt from the article:

Most people treat outsourcing as a zero-sum game—one foreign worker replaces one American worker. But this is not how the dynamic global economy works. In 2007, Matthew Slaughter, an economist at Dartmouth's Tuck School of Business, published a comprehensive study of the hiring practices of 2,500 U.S.-based multinational companies.

He found that when U.S. firms hired lower-cost labor at foreign subsidiaries overseas, their parent companies hired even more people in the U.S. to support expanded operations. Between 1991 and 2001, employment at foreign subsidiaries of U.S. multinationals rose by 2.8 million jobs; during that same period, employment at their parent firms in the U.S. rose by 5.5 million jobs. For every job "outsourced" to India and other foreign countries, nearly two new jobs were generated here in the U.S.

Those new U.S. jobs were higher-skilled and better-paying—filled by scientists, engineers, marketing professionals and others hired to meet the new demand created by their foreign subsidiaries. Todd, the American call center manager transferred to India in "Outsourced," keeps a framed picture of an executive suite back home on his desk—a reminder of the more prestigious job he is working towards. That job is more likely to be created because of the call center in India.

In another article, this one by Kieth Pounds in The Times and Democrat, the author points out that the lower prices caused by outsourcing also create more American jobs by creating more consumer demand, and he observes that the number of jobs being "insourced" to the U.S. by foreign companies is growing at a faster rate than the number of jobs outsourced abroad:

There are two primary reasons why U.S. companies consider outsourcing jobs to a foreign country: global competition and information technology. Globalization has created a vast network of new customers and suppliers, but it has also created increased competition. Information technology has made the coordination of services and manufacturing with foreign countries much easier, and cheaper.

Because outsourcing decreases production costs, consumers who wouldn't have been able to purchase the products are suddenly able to afford them. A most fundamental concept of economics is that "lower prices" lead to more jobs and higher standards of living for consumers.

While many politicians are outraged with outsourcing, they most often neglect to mention the parallel concept of "insourcing," which is the process by which foreign countries hire workers in America. Just ask the 3,400 or so employees of South Carolina's BMW plant. They can tell you all about it. In fact, the number of jobs being "insourced" from other countries is growing at a faster rate than those being outsourced.

Are the projected 5000 new jobs in the LPO industry directly correlated to a 5000 job “shift” (read lost, redundant, right-sized, etc.) at top US law firms? Is it economically sound reasoning to assume that economic interactions are tit-for-tat? In short, no.

Does the increase of LPO mean that there may be marginally less demand for legal support staff for certain low-value service areas? Perhaps. Alternatively, doesn’t allowing firms to offer new services so clients can economically litigate and conduct transactions also increase the demand for the services of law firms, and thus the demand for lawyers? Absolutely.

In this political silly season, when outsourcing is tossed around like a hot coal, with the aim of burning opponents and firing up the electorate, with arguments untethered from the facts, it is great to see commentators with the wisdom and the guts to set the record straight.

October 17, 2010

Once again, India's IT industry may be offering inspiration and lessons for legal outsourcing / LPO / legal services KPO companies. Defying the myth that IT outsourcing to India is limited to "back office" functions like programming and coding, i.e., implementing ideas created in the West, several hundred small Indian IT start-ups are developing world-class products of their own. Even the Obama Administration is using them for U.S. government websites (while pretending to be against outsourcing, during the political silly season). Also, this "third wave of India's IT revolution" (as the trade association NASSCOM is calling it) is not happening in the traditional Indian metro tech hubs like Bangalore or Pune. Instead, it is emerging from small towns and otherwise neglected cities.

The Indian IT/ITeS industry may lately have been at the receiving end of US President Barrack Obama's protectionist policies, but when it comes to US government websites, Obama and his boys rely on made-in-India software like FusionCharts for data visualization.

Surprisingly, FusionCharts is no big-ticket tech firm out of one of India's hot and happening IT hubs. Little known back home in India but popular abroad, this niche software firm is just a 30-member outfit based out of Kolkata from where it caters to its Fortune 500 clientele across 110 countries. Even as some of India's IT biggies await Obama's next move in his increasingly protectionist agenda, a small but rising number of Indian startups like FusionCharts, Zoho, salaree.com, tringme, deskaway, kayako are storming the US and world markets, without so much as moving out of their cubicles in India. Some of these are not even based out of traditional tech hubs like Bangalore and Pune, but are catering to global biggies from their small-town centres in Jalandar and Noida. Nasscom has hailed these startups as the third wave of India's IT revolution.

Nasscom estimates that there are over 650 such start-ups in India involved in product development, of which nearly 100 have burst onto the scene in just the past three years.

Nasscom chief Som Mittal has pegged the young tech product development industry in India at $12 billion by 2015.

Unlike the Silicon Valley "me-toos" of the past, this new breed of tech companies are building products that are lean, indigenous and world-class, say experts. "A lot of our talent is wasted in the services sector. Product development, especially on the internet is the future; it is location agnostic and will bring us recognition, credibility and unlimited non-linear growth," says Pallav Nadhani, who co-founded FusionCharts in 2002 as a 17-year-old.

Global companies outsourcing their legal processes across the world seem to prefer doing business with smaller companies, the results of a new survey suggests. The survey conducted across 6,547 clients globally shows that smaller vendors, including legal outsourcing, LPO and legal KPO companies are satisfying more clients and to a greater degree compared to their larger counterparts.

And is it an accident that legal outsourcing company / LPO / legal services KPO SDD Global, which won the top client survey honors in India (in a survey in which over 2700 vendors were evaluated), has been focusing not on "back office" functions, but rather on high-end, high-value, "front office" work such as sophisticated legal research, analysis, drafting, and editing? Here's what the MSN article reports, dovetailing the previous article in the Times of India:

Says [Eamonn] Kennedy, [research director for the Black Book of Outsourcing, which conducted the survey]: "Smaller outsourcing providers like SDD Global have been pushing their specialist knowledge and deep client understanding as their unique selling point for some time now, claiming that specialists provide a better service. While all outsourcers talk up their ability to specialize, this survey suggests that SDD Global and other relatively small players are best positioned to deliver on that promise."

Also interesting is the fact that SDD Global is headquartered in the relatively small, "Tier 2" city of Mysore, rather than in one of the more costly, congested, metro "hubs," which are supposed to be the center of outsourcing revolution. Hmmm. Could someone remind us why it is better to be located in cities where the cost of living is double or more, where office rents are comparable to expensive Western cities, and where employees spend up to four hours each day commuting to and from work, such that their social life occurs mostly in cars, buses and trains? And if metros are "better," then why are smaller cities and towns generating the third wave of the Indian IT revolution?

In particular, according to the Times report ("Davids Take On Goliaths in Offshoring"), SDD Global Solutions has been ranked the number one outsourcing company in India, and number two in the world, leaping ahead of countless larger players (and over 2700 other vendors evaluated), when it comes to satisfying clients:

A comprehensive poll of over 6,547 outsourcing clients worldwide found that smaller vendors are satisfying more clients, and to a much greater degree, in comparison with their big-ticket counterparts. The study carried out by the Black Book of Outsourcing --which was acquired by business research firm Datamonitor Group a year ago -- has represented all outsourcing fields including IT, KPO, LPO and BPO.

Although feedback on the big names, such as IBM and HP, has been generally positive, the companies that have excelled in delighting the customers have been smaller players. For instance, the Philippines-based ITeS firm, American Discovery and Mysore-based legal process outsourcing firm, SDD Global Solutions, have been ranked as the top two outsourcing companies in the world.

"Like the latest cutting-edge Indian IT engineers, our legal team has proven that India does not need to be a mere back office for the West. In fact, our team has been consistently performing critical front-office functions like sophisticated legal research, analysis and drafting, and in the process, wowing global clients,'' said Russell A. Smith, President, SDD Global.

So what makes smaller players stand tall?

"Smaller outsourcing providers like SDD Global have been pushing their specialist knowledge and deep client understanding as their unique selling point for some time now, claiming that specialists provide a better service. While all outsourcers talk up their ability to specialise, this survey suggests that SDD Global and other smaller players are best positioned to deliver on that promise,'' said Eamonn Kennedy, who led the research for Datamonitor.

Vidya Devaiah, Managing Director at SDD Global, welcomed the news as follows: "We are grateful that so many of our clients were surveyed, ranging from large and small corporations to law firms, and that they had an opportunity to share their enthusiasm for our work." Indeed, SDD Global, as the only legal process outsouring / LPO company focused on high-end legal outsourcing / legal KPO, has assembled a surprising array of fans. They include, for example, Hollywood mega-celebrity and litigation‐magnet Sacha Baron Cohen. This star of such films as "Borat" and "Bruno," who is soon to play Queen lead singer Freddie Mercury in a major biopic produced by Robert De Niro, issued a public statement on the SDD Global website, saying that "SDD Global Solutions will go down in history as a group of revolutionary lawyers." This was after the high-end legal outsourcing KPO played a crucial role in defeating various lawsuits against 20th Century Fox, HBO, Universal Pictures, Channel 4, Media Rights Capital, and other film and television companies.